5 things to know about the new PBM Centene

Centene Corp. looking for a new pharmacy benefit manager.

The St. Louis insurance company announced in June that it was restructuring its Envolve PBM to operate solely as a third-party administrator, after the insurer agreed to pay Ohio and Mississippi a total of $ 143 million to settle allegations of overcharging. their Medicaid departments for medications. … Three months later, Centen agreed to pay an additional $ 71 million to Illinois and Arkansas to settle similar charges.

At least four other states are also researching PBMs for their Medicaid programs. Centene is in dispute resolution negotiations with a group of plaintiffs from the affected states, the insurer said in filing with United States Securities and Exchange Commission. The company has set aside $ 1.25 billion in future payments related to the defunct PBM Envolve. Centene said it restructured Envolve in 2019 to work as a third-party administrator to handle customer claims, and announced in June that it would no longer operate as a PBM.

“There is no guarantee that we will be able to settle such claims with other states within the limits of our estimated reserves,” the Securities and Exchange Commission said in a statement. could harm our business and financial situation. ”

None of these deals are pleas on the part of Centene, the nation’s largest Medicaid managed care provider with 14 million members.

The insurer relied on Envolve and RxAdvance to manage drug costs. Here’s what the insurer is looking for in the new PBM:

1. In 2022, Centene will evaluate proposals from pharmacy benefit companies to manage the insurer’s annual drug costs in excess of $ 30 billion. The insurer plans to award the contract in early 2023 and aims to have the new PBM take over its operations by 2024. “This will be a huge opportunity for external PBM,” CFO Drew Asher told investors. on Tuesday, the company announced its third quarter income statement.

2. Centene paid $ 229 million to switch from RxAdvance in the third quarter, according to the SEC. RxAdvance is backed by former Apple and PepsiCo CEO John Scully, who just helped launch Medicare Advantage-as-a-service for health plans.

3. The insurer is currently dumping other PBM platforms that it considers immaterial, Vice Chair Sarah London told investors during a telephone call. By optimizing pharmacies, the company is seeking to save on administrative costs, London says. “In terms of pharmacies, I would say that in the short term we are very focused on logical consolidation as well as rationalization of non-core platforms,” London said.

4. The company is looking for a supplier who can automate certain processes to save on costs, London said. “We have the operating model capabilities to be implemented, and then the many process automation capabilities in the PBM space,” London told investors. “When you think about the value that PBM’s work can bring to a value creation program, it obviously includes an RFP, but it goes beyond that.”

5. When looking for a new PBM Centene will most likely turn to its competitors. UnitedHealth Group, Aetna, and Cigna CVS Health all own PBMs, which are responsible for processing 75% of all prescription drug applications in the United States. Earlier this year, Anthem and Humana also announced a collaboration to create a new, more transparent PBM platform. Centene previously relied on CVS Caremark to manage drug costs. “Quality always comes first,” Asher told investors about Centene’s needs for PBM. “Execution, the complexity of dealing with a complex customer like Centene is also very important.”

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