CVS Health's Efforts to Lower Insulin Costs and Improve Transparency
2023-07-30
CVS Health held its first quarter 2023 earnings conference call, where senior executives discussed the company's financial performance, future outlook, and addressed the impact of COVID-19 and recent acquisitions. The meeting focused on member affordability, particularly in relation to insulins.
One of the most interesting topics discussed was the role of pharmacy benefit managers (PBMs) in lowering drug costs. CEO Karen Lynch emphasized the efficiency and effectiveness of PBMs in managing pharmacy benefits and overall drug cost management. She addressed concerns about transparency and innovation in the PBM industry, stating that clients have the choice to contract for rebates and spread pricing, with over 98% of rebates passed through on behalf of clients. Lynch highlighted that PBMs have consistently demonstrated their critical role in the healthcare ecosystem and have achieved high levels of member and client satisfaction.
The company's key drivers of business include the execution of recently acquired assets, potential opportunities in the home or health services sector, monitoring utilization expectations, a return to normal utilization levels, and the Oak Street acquisition.
In terms of product and service plans, CVS Health aims to focus on member affordability, specifically in the area of insulins, by offering a $35 or less co-pay for members who require insulin. The company also plans to preserve tools to manage costs for customers and emphasize transparency. Additionally, CVS Health intends to explore alternative growth vehicles and expand product and capabilities for all payers through strategic transactions.
The competitive landscape in the healthcare industry is evolving towards greater transparency, affordability, and cost reduction. CVS Health is actively delivering value to its customers by offering affordable co-pays for insulin and advocating for transparency and cost reduction in drug classes such as biosimilars and GLP-1s. The mention of a large client forum suggests that competition is driving companies to find ways to reduce costs and provide value to customers.
During the meeting, the company discussed several key performance indicators (KPIs) including member affordability, transparency, client advocacy, and the company's star rating and Centene loss. CVS Health is focused on ensuring that members can afford their medications, particularly insulins, by offering a $35 or less co-pay. The company also prioritizes transparency by passing through a significant percentage of rebates and providing full audit rights to customers. Client advocacy is another key focus, with efforts to educate and preserve tools that help manage healthcare spending. The company acknowledged the challenges posed by their star rating and Centene loss, highlighting the need to manage and mitigate these factors.
CVS Health has made progress on strategic initiatives, particularly in the Medicare Advantage space. The company has been working on strengthening its benefits and service capabilities in its Medicare product and has partnered with Oak Street and Signify to bring credibility and strong capabilities to the Medicare Advantage space. The company is also focused on recontracting efforts and improving its performance in the Stars program, with investments in customer satisfaction and positive momentum in internal measurement improvements.
Participants in the CVS Health Q1 2023 earnings call included senior executives such as Larry McGrath, Karen Lynch, Shawn Guertin, Daniel Finke, Michelle Peluso, Prem Shah, David Joyner, Kyle Armbrester, and Mike Pykosz. These individuals provided prepared remarks during the call and were available for the question-and-answer session. The call discussed CVS Health's financial performance, future events, industry conditions, and the expected benefits of their initiatives.
Overall, CVS Health's pharmacy benefit management (PBM) industry is performing well, according to CEO Karen Lynch. PBMs play a crucial role in lowering drug costs, and investigations have consistently found them to operate efficiently and effectively. The company passes through over 98% of rebates on behalf of its clients and has shown low to mid-single-digit growth in overall pharmacy spend. Both member and client satisfaction levels remain high. The focus now is on improving competition and affordability in the remaining 10% of prescriptions, which include high list prices.