Anthem has found a new partner to help run prescription drug coverage after the Blue Cross-Blue Shield insurer's rocky relationship with Express Scripts ends.
The nation's second-largest insurer says it will create a pharmacy benefits manager called IngenioRx starting in 2020 and will work with CVS Health Corp. to manage the business. Terms of the deal were not disclosed.
Shares of all three companies climbed on the news after markets opened Wednesday.
Pharmacy benefit managers, or PBMs, run prescription drug plans for employers, government agencies and insurers, among other clients. They use their large purchasing power to negotiate prices.
Anthem expects the new deal to generate an estimated $4 billion in annual savings once all of its customers are moved over to it. Company executives also told analysts in a conference call that they anticipate "significant" membership growth both through existing customers and new business.
Anthem, based in Indianapolis, provides health coverage to more than 40 million people in several states, including big markets like New York and California. The insurer said its PBM will serve its health plans as well as customers outside Anthem. CVS Health, based in Woonsocket, Rhode Island, will process claims and provide other services. The companies agreed to a five-year deal.
Anthem Inc. had left the PBM business in 2009, when it sold its operations to Express Scripts Holding Co. for about $4.7 billion. The two companies started working together, but their relationship soured as they started squabbling publicly over prices.
That fighting led to a lawsuit filed by Anthem last year. The insurer said it wanted to recover damages for drug prices that are higher than competitive benchmarks. Express Scripts said the case had no merit.
Anthem has "absolute confidence" that its new PBM arrangement will give it competitive pricing on prescription drugs, Executive Vice President Brian Griffin told analysts during a Wednesday morning call.
Express Scripts spokesman Brian Henry said the company was disappointed that Anthem decided to work with another PBM, and they know of no option that will give Anthem "the combination of savings, member and client stability, and clinical expertise that Express Scripts represents."
Shares of Express Scripts slipped back in April when it said Anthem, its biggest customer, didn't plan to extend its contract after the deal expires in 2019.
But the St. Louis company's stock actually climbed higher than CVS shares Wednesday morning, rising 2 percent, or $1.17 to $58.37. CVS inched up 36 cents to $72.96 as broader indexes also opened flat. Meanwhile, Anthem shares rose more than 4 percent, or $8.40, to $195.81.