Pharmacy Briefing: September 2020

Pharmacy Briefing is a monthly summary of select U.S. Food and Drug Administration (FDA) approvals and launches, treatment guidelines and research updates, and other newsworthy events that have the potential to impact commercial drug utilization or costs.


  • Teladoc and Livongo merge to create $37 billion dollar health care enterprise
  • President Trump signs executive order for essential drugs and medical supplies
  • Express Scripts makes changes to 2021 national formulary
  • UnitedHealthcare to stop covering Descovy (emtricitabine/tenofovir alafenamide) starting September 1st

FDA Approvals and Launches

  • Spravato (esketamine) receives new indication to treat certain patients with major depressive disorder.
  • Evrysdi (risdiplam) is approved as the first oral therapy to treat spinal muscular atrophy.
  • Enspryng (satralizumab) is approved to treat neuromyelitis optica spectrum disorder (NMOSD), a rare autoimmune disease.
  • Generic version of Tecfidera (dimethyl fumarate), used to treat multiple sclerosis, launches.
  • Kesimpta (ofatumumab) is approved to treat multiple sclerosis.
  • Winlevi (clascoterone) cream is approved to treat acne vulgaris.
  • FDA removes amputation risk Boxed Warning from Invokana (canagliflozin) labeling.
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Overview of proposed Value in HealthCare Act

At the end of July, a bipartisan bill entitled “Value in HealthCare Act of 2020” was introduced to the U.S. House of Representatives proposing a number of significant changes to the Centers for Medicare and Medicaid Services Medicare Shared Savings Program (MSSP) and the Advanced Alternative Payment Model feature of the Medicare Access and CHIP Reauthorization Act of 2015.

Given the timing of this bill, there is uncertainty about whether (or when) the bill will be passed into law. However, the introduction of it is a significant step towards encouraging value-based care and signifies an appetite for change in the MSSP in order to encourage additional participation of Accountable Care Organizations (ACOs).

In this paper, Milliman actuaries Noah Champagne and Andrew Yang discuss the proposed changes in this bill as well as the implications of each change on ACOs—in particular those under the Pathways to Success model.

Optimizing pharmacy benefit manager contracts

Understanding the contract between a plan sponsor and its pharmacy benefit manager (PBM) is the first step toward optimizing your organization’s pharmacy benefit. Typical contracts with PBMs are structured under a three-year master agreement negotiated at the time of implementing the PBM, but the agreement can be updated via addendums and amendments throughout the contract terms. PBM contracts often include a number of definitions and terms that explain how drug claims are adjudicated and priced. Two critical contracting terms are drug definitions and the types of exclusions from the pricing guarantees. These terms play a critical role in the financial reconciliation process involved in PBM pricing and are highly impactful on the financial value of the agreement.

To read more about how to optimize a PBM contract, read this paper by Miliman’s Scott McEachern and Patrick Cambel.

International private medical insurance strategies and the impact of COVID-19

The international private medical insurance (IPMI) market has recorded significant growth in recent years. Several trends have led to a US$16 billion industry, headed by a number of established insurance players and an increasing number of new entrants looking to grab market share in this highly specialised insurance market.

As most players in this sector have come to realise, winning in this highly competitive segment requires very specific skills sets and capabilities in order to ensure competitive offerings, pricing, medical servicing, and supporting infrastructure. The COVID-19 pandemic adds additional levels of uncertainty to IPMI market participants given the high dependency of the sector on international mobility and travel as well as related effects on health claims costs and expenditures.

In this paper, Milliman’s Joanne Buckle and Peter Gregor examine the strategies and business models adopted by leading players in IPMI as well as the key success factors and capabilities required to win and to sustain profitable growth in a post-COVID-19 world.

Developing reduced benefit options for LTC policyholders

In order to provide insureds with additional options after being informed of premium increases, long-term care (LTC) insurers often present reduced benefit options (RBOs) within policyholder notice letters. Recently, companies have offered RBOs that weren’t available before the rate change.

In some cases, policyholders can use these innovative RBOs to target similar premiums after the rate increase is implemented, to alleviate financial strain for those who need it.

But not all RBOs are created equal. In this article, Milliman’s Robert Eaton and Nebraska Department of Insurance’s Rhonda Ahrens explore two methods of developing RBOs: the future loss ratio neutral approach and the cash flow neutral approach.

Survey analyzes differences between Medicare Advantage RAPS and EDS risk scores

As the Centers for Medicare and Medicaid Services (CMS) continues to phase out the Risk Adjustment Payment System (RAPS) as a source for risk adjustment diagnoses, it is important that Medicare Advantage organizations (MAOs) understand the expected impact of the Encounter Data Processing System (EDS) as the single source of diagnoses for calculating risk scores and the impact this transition may have on revenue.

Milliman professionals have periodically conducted surveys that identified the average difference between RAPS-based and EDS-based risk scores. The most recent survey results show that EDS scores have now caught up to or exceeded RAPS scores in many cases, whereas surveys from prior years showed that EDS were generally lower than RAPS scores.

Milliman actuaries David Koenig, Emily Vandermause, and Rebecca Gergen discuss the results in their paper entitled “Have we reached parity between Medicare Advantage RAPS and EDS risk scores?