Tag: pharmacy

Cigna-Express Scripts, CVS-Aetna deals continue vertical integration in healthcare

By Curtis Campbell, Class of 2019; Kim Looney, Partner at Waller

The Cigna-Express Scripts and the CVS Health-Aetna mergers are among the most significant healthcare mergers of the past decade and are anticipated to transform the U.S. healthcare business. Both of these vertical deals have successfully shown how they can provide consumer benefits in order to pass federal antitrust scrutiny.

Cigna-Express Scripts

The Department of Justice decided not to challenge Cigna’s $67 billion acquisition of Express Scripts because the deal would “unlikely result in harm to competition or consumers.” Regulators spent six months on the investigation, reviewed more than 2 million documents, and interviewed more than 100 people before reaching their conclusion. However, while the federal antitrust division will not seek to block the merger, the deal is still subject to state regulations and various departments of insurance. The deal is expected to close at the end of the year.

Because the DOJ is not challenging the merger, Cigna is closer to putting its medical benefit services and Express Scripts expertise in pharmacy benefit management under one roof. This will potentially help rein in spending on costly specialty drugs. However, there is some concern that consumers could end up at the “mercy of a handful of giants” as choices of medical care and pharmacy become a thing of the past. However, backers of the merger thought that it will create efficiencies in the market. Cigna CEO David Cordani stated that “we are another step closer to completing our merger and delivering greater affordability, choice and predictability to our customers and clients as a combined company.

Given the lack of overlap between Cigna’s business versus Express Scripts, analysts stated that it is not surprising that the merger went through. Cigna had to overcome last-minute opposition from some investors, but they backed down after major shareholder advisory firms came out in support of the deal. Cigna executives said they expect the deal to result in earnings per share to increase from $18 to $20-21 by 2021 with a long-term annual growth of 6 to 8 percent.

CVS Health-Aetna

Shortly after approving the Cigna-Express Scripts merger, the DOJ also conditionally approved the $69 billion merger between CVS Health and Aetna. The conditional approval was based on Aetna’s decision to sell off its private Medicare drug plans. This addressed the government’s concerns that the combined companies would control too much of the healthcare market.

CVS Health had revenues of about $185 billion last year and provided prescription plans to roughly 94 million customers. Aetna had about $60 billion in revenue last year and currently covers 22 million people in its prescription health plans. With this merger, the two companies hope to better coordinate care for consumers as the mergers aim to help tighten cost controls. The merger focuses on Aetna’s addition of a retail component and the use of CVS’s 10,000 pharmacies and 1,100 retail clinics to deliver care, enabling a variety of new services to be brought into its retail stores, potentially transforming the corner pharmacy chain to a healthcare hub with thousands of locations.   This change could enable CVS stores to serve as a location where someone could get care for ailments ranging from a sore throat to diabetes. A person could also potentially go to a CVS store to get blood tests to monitor chronic conditions.

These two mega-mergers continue the growing trend of healthcare companies vertically integrating to improve quality and lower healthcare costs. With more consumers going to outpatient facilities instead of hospitals, this merger could help claim more of a market share in the healthcare industry by utilizing the CVS stores to attract more consumers. The merger also could help by decreasing deductibles and lowering out-of-pocket spending, which are two primary concerns for consumers when deciding to seek medical care.

These mergers could also put pressure on rival companies to come up with their own deals.  Critics worry that these mergers mean that consumers could end up with fewer options and higher expenses because consumers could have less control over their medical care and prescription drugs. Only time will tell how these mergers actually affect consumers going forward.

Dr. Alexa, MD

By Emmie Futrell, Class of 2018

Picturing Amazon drones dropping pharmaceuticals from the sky, or Amazon’s Alexa
becoming Dr. Alexa, MD, may not be so far-fetched as it sounds. Amazon has reportedly
obtained approval for wholesale pharmacy licenses in at least 12 states. They include Nevada,
Arizona, North Dakota, Louisiana, Alabama, New Jersey, Michigan, Connecticut, Idaho, New
Hampshire, Oregon and Tennessee. An application is still pending in Maine.
The infrastructure required for Amazon to begin shipping pharmaceutical drugs to
consumers is still in its infancy—the recently obtained licenses only allow Amazon to sell
medical-surgical equipment, devices and products. These include tools like syringes, ultrasound
gel, and sutures, while Amazon’s license in North Dakota suggests that it may be able to
distribute medical equipment and gas. Complex regulations and specific pharmacy licenses that
vary state-to-state will provide additional hurdles for Amazon, if the end goal is to distribute
prescription drugs. For example, Amazon would need to be certified by the National Association
of Boards of Pharmacy as a “Verified Accredited Wholesale Distributor,” in order to distribute
pharmaceuticals.

However, these hurdles may not seem as high as one would expect. With Amazon’s
recent acquisition of Whole Foods, Amazon could implement and use Whole Foods pharmacies
as a platform to create a mail-order pharmacy, effectively controlling an Amazon-owned supply
chain. Amazon’s reach and boundary-pushing technology could make the company attractive to
name brand pharmaceutical manufacturers, searching for innovative ways to reach their
customers.
This move towards the outskirts of the pharmaceutical industry has not been lost on
traditional pharmacy benefits managers like Walgreens and CVS. In January of 2017, Walgreens
Boots Alliance and FedEx announced a several-year agreement to install FedEx pick-up and
drop-off services in Walgreens stores. The long-term goal of this agreement is to create
infrastructure for reliable deliveries of prescribed pharmaceuticals to Walgreens customers, to
ensure that elderly, disabled or other mobility-challenged patients are still able to access their
much-needed prescriptions. Currently, mail order pharmacy services only dispense about 1 in 10
prescriptions of the total four billion that are filled in the United States. Perhaps this recent
Amazon movement intends to increase that number.
There are many other benefits to the mail-order pharmacy framework, enough that
insurance providers like BlueCross BlueShield of Tennessee have given their endorsement. Not
only are mail-order pharmaceuticals convenient, but they could also have a positive effect on
adherence. The BlueCross framework of delivering a 90-day supply ensures that there are no
gaps in prescription access that may be caused by attempts to plan a trip to a local pharmacy.
With the current climate seemingly accepting of the movement of prescriptions out of the
traditional brick-and-mortar pharmacies, the industry seems poised for Amazon’s tiptoe into this
market.

CVS and Aetna Merger

By Brandon Huber, Class of 2019

According to the Wall Street Journal, CVS and Aetna are reportedly in serious talks over a potential merger between the two healthcare giants. With the potential buyout price in the ballpark of $70 billion, the deal would not only set the record for the largest merger of any two companies in 2017, it would easily be considered the largest health provider merger of all time, shattering Express Scripts’ $29 billion merger with Medco back in 2012.

The deal would combine CVS, currently the largest pharmacy retail chain, with Aetna, the third largest health insurer provider in the United States. Although both companies have declined to comment on the negotiations of the deal, there have been reports that a deal could be reached by the two companies as soon as December. Despite the growing pressure over the last few years on healthcare providers to consolidate, due in large part to soaring medical costs, a merger of this size promises to send a shockwave across the entire healthcare industry.

The merger comes on the heels of news that Amazon, the online retail giant, almost certainly will enter the prescription-drug market as soon as 2019. Although Amazon has not yet announced any official plans to enter the pharmacy retail business, there can be little doubt that even rumors of such plans would be enough to motivate CVS, and other pharmacy retail chains, to find creative ways to expand and grow.

CVS’ buyout of Aetna, at least from the outset, seems to present the perfect opportunity for both companies to benefit from the deal. On the other hand, however, whether consumers stand to gain any benefit from the merger remains to be seen. From Aetna’s perspective, the merger affords the opportunity to provide better care management. Insurers have long believed that the best way to control rising healthcare costs is to ensure they have more access into the lives of their beneficiaries. The deal would help Aetna ensure its beneficiaries were staying on their medicines, getting the care they need at more cost-effective locations—like a CVS health clinic—as opposed to a more expensive and perhaps unnecessary hospital visit.

Conversely, not only would CVS be able to expand its reach within the healthcare market, the deal would drive more traffic to its stores as more of Aetna’s insured beneficiaries would seek preventive care and treatment for less serious medical issues at the clinics located within CVS stores. Additionally, CVS could expect an influx of customers because Aetna’s beneficiaries would likely use CVS to get their prescriptions filled.

With that said, however, despite the near guarantee that both parties would benefit significantly from such a deal, there are some who remain skeptical as to whether the deal will benefit consumers. According to Amanda Starc, associate professor of strategy at Northwestern’s Kellogg School of Management, CVS’ position as a pharmacy benefit manager would allow the merged companies to negotiate lower drug prices with pharmaceutical manufacturers. It is unlikely, however, that these newly acquired drug-rates, now available to Aetna as a result of its newly acquired market power, would translate into lower prices for customers and not into profits for the company.

Combatting the Opioid Crisis

By Andy Cole, Class of 2018

Florida Governor Rick Scott announced on September 26, 2017, plans to introduce legislation that would limit opioid prescriptions to only three days unless a set of very strict standards are met. If the standards are met, then a seven day supply would be permitted. Currently, this bill has not been filed in the House or Senate, but a similar seven day limit bill has been filed.
This legislation follows President Donald Trump declaring the opioid epidemic as a national emergency and many other states and pharmaceutical retailers taking similar stances. Less than a week before Gov. Scott’s announcement, pharmaceutical retailer CVS announced that beginning next February it will limit opioid prescriptions to seven days for patients who are new to pain therapy. Additionally, the Pharmaceutical Research and Manufacturers of America has announced its support for a seven day limit on opioid prescriptions with exceptions for certain conditions such as cancer.
It is unclear if this legislation will pass as it is currently planned. If so, it will be the strictest opioid limitations in the country. Many states have passed seven day limits for first time opioid patients.
In Massachusetts, Governor Charlie Baker proposed a similar 72 hour limit on opioids for first time users. This proposal was met with much criticism from many doctors and advocacy groups who called the proposal “draconian.” The final product of the bill had overwhelming support from both parties. Baker, a Republican, signed the final bill after it passed unanimously through the Democrat controlled legislature.
Many state legislatures have found it hard to balance the need for doctors to maintain discretion and to curb a national crisis. Many doctors and organizations are calling for tighter restrictions that prevent overprescribing of opioids to patients who do not need the medication.
Dr. Steven Stanos, president of American Academy of Pain Medicine, said the academy “supports any initiative that would help limit the effects of over prescribing medications or leading to excessive unused medicines that could lead to harm to a patient or family members or their community.”
The trend of states seeking to regulate the amounts of opioids doctors are allowed to prescribe will continue to grow until the epidemic can be helmed. As many states look to begin drafting their legislative initiatives for 2018 and many politicians prepare for midterm elections, combating opioid addictions will undoubtedly be a bipartisan effort.
There is a possibility that many states will push for law similar to the law enacted in Massachusetts, which requires practitioners to take more steps to combat opioid misuse. The first point of the law is to limit opioid prescriptions to seven days for any new opioid prescription. This applies to all opiates Schedule II through Schedule VI. There are exceptions to this limit. Physicians can prescribe for more than seven days if the prescription is designed for the treatment of substance use disorder or opioid dependence, for inpatient prescriptions, for pain related to an acute medical condition, for chronic pain management, for pain associated with a cancer diagnoses, or for palliative care.
If a first time opiate prescription is being written for greater than a seven-day supply pursuant to an exception, the prescriber must document in the medical record the specific exception for which the opiate is being prescribed; and provide brief information about the actual condition or treatment that necessitates more than seven days; and indicate whether there were known and available non-opiate alternatives. The state has added an additional requirement for prescribing opioids to minors under the age of eighteen. For minors, the prescriber must also document that there was a discussion with the parent/guardian of the known risks with the specific prescription and why it is necessary for that condition/treatment. Additionally, prescribers must document in the medical record each and every time an outpatient opioid prescription is being issued to anyone.
This law moves beyond the prescription limit and also requires prescribers to check the Prescription Monitoring Program every time he or she schedules a Schedule II or III narcotic. The law also requires prescribers to complete training in pain management and addiction. In addition, it requires prescribers and patients to enter into a written pain management treatment agreement for prescriptions for extended-release long-acting opioids.
Finally, this law also places a new burden on pharmacists. If a patient requests a partially filled opioid prescription, the pharmacist must notify the prescriber within seven days. Then the prescriber is responsible for discussing with the patient the quantity of the prescription and the option to partial fill.
From an attorney’s point of view, it is important to make sure your client is aware of all of these changes and their new obligations under the law. While Tennessee has not enacted this type of law yet, combatting the opioid crisis in the state will be high on the legislative agenda for the next few years. A piece of legislation similar to this is bound to be at least be discussed by lawmakers as a potential route to take. At the moment it is difficult to tell how difficult it will be to monitor providers who may abuse the system.