Aetna/Coventry $15B Pharmacy Spend Will Be Managed By Different PBMs Near Term
Executive Summary
Following Aetna’s acquisition of Coventry Health Care, Express Scripts will handle pharmacy benefits for Coventry’s Medicare business through 2015 and its commercial insurance business through 2016, while Aetna has a long-term agreement with CVS Caremark through 2023.
Aetna Inc. will have annual pharmacy benefit expenditures of $15 billion once its planned acquisition of Coventry Health Care Inc. closes in mid-2013, but due to existing contracts, each company’s drug benefits will be managed by separate pharmacy benefit managers until at least 2015, Aetna noted during an Aug. 20 investor call.
Aetna has 8.6 million pharmacy members while Coventry has nearly 4 million, according to the companies. The call was held to review details of Aetna’s planned acquisition of Coventry (Also see "Aetna’s Stake In Medicare Part D Will Quadruple With Coventry Acquisition" - Pink Sheet, 27 Aug, 2012.).
Medco Health Solutions Inc., now part of Express Scripts Holding Co., has contracted to manage the pharmacy benefit for Coventry’s Medicare business through 2015 and its commercial insurance business through 2016. For its part, Aetna has a long-term contract in place through 2023 with CVS Health Corp. for most of its pharmacy benefits (Also see "Aetna Internal PBM No Longer In Play With CVS Caremark Contract" - Pink Sheet, 2 Aug, 2010.).
Currently, “both companies have very, very good PBM contracts,” Aetna Chief Financial Officer Joe Zubretsky said during the call. He said he expects Coventry’s contracts with Medco and Aetna’s contract with CVS Caremark to run “to term.” However, he added, “when the opportunity presents itself, the combined organization will have $15 billion of pharmacy spend and we'll make sure we get the best pricing available in the market.”
Under its 12-year contract with CVS Caremark, which became effective Jan. 1, 2011, Aetna retains control of key activities such as medical and pharmacy policy, including formulary and benefit design, the clinical integration of pharmacy and medical benefits, drug rebate contracting and administration, management of member grievances and appeals, and management of its specialty drug and mail-order pharmacies.
Aetna recently brought in a new head of pharmacy operations, Ren Elder, to oversee the management of those activities. Elder joins Aetna from Anthem Inc., where he was president of the company’s former internal PBM NextRx, which was acquired by Express Scripts in 2009 (Also see "Express Scripts Purchase Deal For NextRx Includes 10-Year PBM Contract With WellPoint" - Pink Sheet, 13 Apr, 2009.).
In his new job, Elder will be responsible for running the company’s pharmacy business, including specialty pharmacy disease management and home delivery, Aetna said in an Aug. 17 release. He will also help to “further develop Aetna's pharmacy benefit management integrated capabilities” as well as managing Aetna's strategic agreement with CVS Caremark.