Despite facing a number of uphill battles, vertical integration among pharmacy benefit managers (PBMs) and national health plans has become one of the biggest trends in the national payer space. This past year we saw 2 major mergers come to fruition. First, there was Cigna and ESI, with its deal closing in December 2018; the second was the CVS-Aetna merger, which closed in September of this year. Vertical integration of these organizations purport to offer beneficiaries expanded programs and affordability resulting from their combined capabilities and increased buying power. Yet, the question is, will the public truly realize lower out-of-pocket costs and improved affordability of healthcare?

Clearly, we are just scratching the surface and the full impact of these newly merged “mega” plans is yet to be determined. With that said, we have begun to see some signals that innovation may be upon us. For example, Cigna-ESI recently launched its Embarc Benefit Protection platform.1 This benefit design program aims to offer ultra-expensive gene therapies at no out-of-pocket (OOP) cost to members whose health plan or employer has opted in.

Outside of vertical integration, national payers are in the limelight when it comes to the broader scale issue of high drug prices and rising medical costs. Similar to years past, health plans remain challenged to manage these issues while simultaneously providing benefit offerings that pose minimal increases to premiums and member OOP costs. Yet unlike past years, a common lever to mitigate drug costs and inflation has undergone criticism from multiple directions.

Drug rebates are the current culprit and are blamed, in part, as a root cause for rising drug prices. Moreover, the utility of rebates by PBMs and national health plans as a means to drive profits has come under question, and the lack of pass-through discounts to members at the point-of-sale has become a bone of contention. In response to this scrutiny, plans have countered with stronger promotion of benefit designs that pass through rebates to the consumer. For example, in March of 2019, UnitedHealth Group and OptumRx announced that they would be expanding their point-of-sale rebate pass-through program to “all new employer-sponsored plans” for the 2020 benefit year.2

A final notable trend among the many happenings this year is the increased focus on management of drugs covered under the medical benefit. According to the 2018 Magellan Medical Pharmacy Trend report, medical pharmacy trend increased 18% from 2016 to 2017.3 Similar to payer response when trends increase on the pharmacy benefit, rebate contracting elevates its status as a lever to mitigate trend. Evidence of this reactionary tactic are also highlighted in the Magellan report as it noted 71% of payers are using some form of product preference for medical benefit drugs. Additional examples of increased focus on medical contracting are evident when looking outside the commercial space and into Medicare. This sector began allowing step therapies for Part B medications in order to improve negotiation leverage.4

Manufacturers need to continue to monitor the evolution of a new type of payer and any potential impact to products. Managing trend in both pharmacy and medical remains a main objective and goal for payers and may become more evident with the vertical integrations of health plans and PBMs.


  1. Miller S. Embarc benefit protection. Express Scripts. Published September 4, 2019. Accessed November 25, 2019.
  2. Japsen B. UnitedHealth and Optum Rx to pass drug maker rebates to more clients. Published March 12, 2019. Accessed November 25, 2019.
  3. Medical Pharmacy Trend Report; 2018 Ninth Edition. Magellan Rx Management.
  4. Centers for Medicare & Medicaid Services. Medicare Advantage prior authorization and step therapy for Part B drugs. Published August 7, 2018. Accessed November 25, 2019.