UNH UnitedHealth Group Inc

By Anna Wilde Mathews 

UnitedHealth Group Inc. said it would significantly expand a change to how it handles rebates from drugmakers by requiring new employer clients to pass them on to people who take the medications.

The move will apply to employers that sign new contracts after Jan. 1, 2020, but UnitedHealth will grandfather in existing clients that chose a different setup. The new shift will involve employers that begin using UnitedHealth's pharmacy-benefit manager, OptumRx, including those that are self-insured, which is the vast majority of large companies.

Drugmakers routinely pay rebates to insurers and pharmacy-benefit managers to offset the full list price of brand-name drugs. The companies use the rebates in a variety of ways. Often, they are passed along to employer clients, which may use them to reduce premiums for all workers, or defray their own costs.

The move goes further than other major pharmacy-benefit managers, which haven't made it mandatory to pass rebates on to consumers, according to UnitedHealth and industry consultants. The Trump administration has proposed a parallel approach that would affect Medicare and Medicaid plans, which pharmacy-benefit managers have generally opposed.

"We're focused on making sure the value we're negotiating on behalf of our clients is passed on to the consumer," said John Prince, chief executive of OptumRx. The move to make the shift mandatory for new clients "is a huge statement to the market," he said. UnitedHealth officials say the employer-plan situation is different from Medicare, where shifting the rebate treatment could force up premiums significantly.

UnitedHealth this year switched to passing along rebates directly to consumers under certain employer plans offered by its insurance arm, UnitedHealthcare, now affecting about nine million people.

The topic of rebates--along with the opaque process of setting prices for drugs in general--is currently under a bright spotlight, with pharmaceutical executives in a recent congressional hearing blaming the practices of insurers and pharmacy-benefit managers for driving prices higher.

On the other side, health plans and benefit managers have said they rein in costs by negotiating with drugmakers, including by winning rebates that could be used to reduce premiums.

But critics, including Trump administration officials, say the rebates should flow directly to the consumers who take the affected medications to reduce their out-of-pocket charges. UnitedHealth said its existing program to pass through rebates has lowered costs for affected consumers by $130 per prescription on average and increased their adherence to medication regimens.

A growing share of large employers pass along rebates to patients who take the affected drugs, according to a survey by the National Business Group on Health. Of the large employers surveyed, 20% were doing it in 2018, another 7% said they planned to start this year and an additional 31% were considering a shift in 2020 or 2021. Brian Marcotte, CEO of the employer group, said he believed the shift to passing rebates along to consumers "is the direction everything is going."

Still, UnitedHealth risks pushback from employers that want to use rebates in other ways. "Some employers won't like it, absolutely," said Nadina Rosier, who is head of the pharmacy practice at advisory firm Willis Towers Watson. "They want flexibility to manage the benefit in the way they see fit, and the goal is to drive to lowest net cost."

David Dross, leader of the pharmacy practice at Mercer, a consulting unit of Marsh & McLennan, said some employers might want the freedom to handle rebates the way they want and "they might base their decision about a PBM on that."

Daniel J. Schumacher, president of UnitedHealthcare, said there is a "potential risk" in making the rebate approach mandatory, but "we think it's a risk worth taking," with major benefits particularly for consumers who take high-cost medications.

Write to Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

March 12, 2019 06:14 ET (10:14 GMT)

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