Anthem Not Entitled to $3 Billion, Express Scripts Says
Express Scripts Holding Co. said it’s still working to resolve its contract dispute with health insurer Anthem Inc., which has claimed it should be getting $3 billion a year more in prescription drug savings from the pharmacy benefit manager.
“We remain fully committed to good faith negotiations,” Express Scripts Chief Executive Officer George Paz said on a conference call with investors on Wednesday, adding that Anthem wasn’t entitled to $3 billion. “I have no clue where the $3 billion came from. I have no concept, the number doesn’t make any sense.”
In January, Anthem said that Express Scripts wasn’t passing along enough in savings on drugs and threatened to take its business elsewhere. The companies’ relationship goes back to 2009, when Express Scripts paid $4.7 billion to acquire Anthem’s drug-benefit plan, NextRx, along with a 10-year contract to manage drug benefits for Anthem members that expires in 2019. The contract allows Anthem to review periodically what it pays for drugs and to negotiate new terms.
Paz declined to go into details on the talks. “People are a little dismayed that this is actually taking place in the public markets,” he said. Other accounts are renewing at a normal pace, Paz said.
Jill Becher, an Anthem spokeswoman, said she had no immediate comment.
On Tuesday, the company reported fourth-quarter earnings of $1.56 a share, excluding one-time items, matching an average of estimates compiled by Bloomberg. It managed 341.5 million claims, on an adjusted basis, an increase of 1.3 percent. Those claims were more profitable than a year ago, the company said in a statement, with Ebitda per claim rising 2.7 percent to $5.66. Ebitda stands for earnings before interest, taxes, depreciation and amortization.
Express Scripts shares rose 1.4 percent to $69.59 at 11:37 a.m. in New York.
Profit Per Prescription Claim Has Soared at Express Scripts
On the conference call, Express Scripts executives suggested there may be job reductions this year.
“As we shut down facilities and we consolidate operations to get better efficiencies, that reduces headcount,” said Paz, in response to an analyst question about cuts in 2015 and whether Express Scripts has a target for 2016.
“We still have an a lot of inefficiencies in our mail-order service that we can still go after,” Paz said. “This is going to be an annual exercise for us.” He declined to go into further details.
Fourth-quarter net income rose to $773.5 million, or $1.13 a share, from $581.8 million, or 79 cents, a year earlier. Revenue fell less than 1 percent $26.2 billion, less than analysts had predicted.
Insurers and employers pay Express Scripts to rein in the cost of drugs by pitting brand-name manufacturers against one another for access to the company’s lists of covered drugs, and by pushing patients to take generic versions instead of more expensive brand-name counterparts.
The company raised the lower bound of its 2016 adjusted earnings forecast to $6.10 to $6.28 a share, from its previously announced $6.08 to $6.28 a share.
–With assistance from Zachary Tracer.