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Express Scripts CEO wants to resolve dispute with Anthem

Anthem's lawsuit could signal a shift in the negotiating power of large insurers

The incoming CEO for Express Scripts wants to resolve a longstanding drug pricing dispute with its largest client that has morphed into a lawsuit, a confrontation that underscores the growing negotiating power for large insurers and questions Express Scripts' independent business model.

Express Scripts President Tim Wentworth, who is scheduled to assume the role of CEO in May, told The Boston Globe that his company doesn't "intend to lose Anthem." The insurer filed a lawsuit against the pharmacy benefits manager (PBM) on Monday, claiming Express Scripts refused to engage in good faith negotiations to ensure Anthem was receiving competitive benchmark pricing on prescription drugs. Anthem is also seeking its right to terminate its contract with Express Scripts.

Anthem is asking for $15 billion, the company's estimate of overpayments through 2019, when its contract with the PBM terminates. In January, Anthem CEO Joseph Swedish claimed Express Scripts owed his company $3 billion more each year in prescription drug savings, a claim the PBM refuted.

One Citigroup analyst told the Globe that even if Anthem could switch to another PBM, it would be a complicated transition that would jeopardize millions of members. However, Swedish has previously hinted that Anthem's deal to acquire Cigna could alter its current PBM arrangement.

For Express Scripts, the lawsuit could have "far-reaching effects" on the company's independent business model, according to Fitch Ratings. The PBM has long claimed it is better suited to negotiated cost savings for insurers because, unlike other pharmacy benefits managers that are aligned with larger companies, Express Scripts' independence offers greater negotiating power. The lawsuit challenges that assertion directly, and depending on the outcome, other clients may push for more savings.

The lawsuit is one indication that health insurers are gaining more negotiating leverage than ever before, an issue that could have even greater implications depending on the federal approval of two major insurance mergers, according to The Wall Street Journal reports. As insurers gain a larger market share, they may be more willing to use their size to influence negotiations with other healthcare companies.

For more:
- read The Boston Globe article
- here's the Fitch Ratings analysis
- read The Wall Street Journal article

Related Articles:
Anthem, Cigna see pharmacy benefit management opportunities in merger
Anthem sues Express Scripts over drug prices
Express Scripts disputes Anthem's claim that it's owed $3B
A glimpse into the DOJ's review of health insurer mega-mergers