This is Jacob Emerson with the Becker's payer issues podcast. Here's your biweekly industry news briefing for September 18th. The Cigna Group's pharmacy benefit manager, Express Scripts, is suing the Federal Trade Commission and chair Lina Khan over what it describes as a, quote, unfair, biased, erroneous, and defamatory report on PBMs released by the agency earlier this year.
Express Scripts called the FTC's July report 74 pages of unsupported innuendo and claims the agency relied on cherry picked information to push a predetermined narrative that PBMs inflate drug prices and disadvantage independent pharmacies. In 2022, the FTC launched its inquiry into the PBM industry, requesting information and records from the 6 largest PBMs regarding their business practices.
The commission's corresponding reports published in July of this year stated that PBMs favor their own pharmacies and exercise significant market control, affecting both medication access and affordability. The report also claimed PBMs sometimes steer patients away from cheaper drugs and overcharge for treatments related to cancer.
Express Scripts, in its lawsuit filed September 17th in the Saint Louis federal court, argues that the commission's report, driven by bias and politics rather than evidence, falsely concluded that PBMs inflate drug costs and harm independent pharmacies. The company claims its business has been damaged by defamatory statements and unconstitutional actions. It's seeking a court ruling to invalidate the report, recuse chair Khan,
and recover legal costs. Cigna Group's chief legal officer stated publicly that the goal of the suit is to have the report retracted and removed from the FTC's website. According to the FTC's reports, the 3 largest PBMs, CVS Caremark, Express Scripts, and UnitedHealth's OptumRx, control nearly 80% of US prescription drug distribution, serving about 270,000,000 people. The report also noted that PBMs contributed to the closure of 10% of independent pharmacies in rural areas between 2013 and 2020.
The FTC defended its report in the Wall Street Journal, telling the outlets that just 3 companies control nearly 80% of the markets that millions of Americans must use to purchase necessary drugs at high costs. This is a complicated and opaque market, and the FTC is committed to using its clear authority to help the public and policymakers understand it.
When the report was released, Lina Khan added in a corresponding news release, the PBMs have the power to hike drug costs and squeeze independent pharmacies, which many Americans, especially in rural areas, rely on for essential care. The FTC will continue to use all available tools, she said, to scrutinize dominant players across health care markets and ensure that Americans have access to affordable health care.
At the time of the report's release, another FTC commissioner, Melissa Holyoke, issued dissenting statement criticizing the report's process and lack of substantive engagement on policy. She said, quote, the report was plagued by process irregularities and concerns over the substance or lack thereof of the original order.
She further expressed concerns that the report would exacerbate ideological divides and erode the FTC's legitimacy, failing to provide a better understanding of PBM practices and their impact on consumers. Cigna's full lawsuit is available to view on Becker's Payers website. Well, 4 4 insurers or their subsidiaries are among the top 100 companies in the US for jobs that consist of some remote work and some in office work.
The job site called FlexJobs, which is a site for work from home and flexible scheduling employment, released its list in September, ranking companies by the highest number of hybrid job openings posted between September 1st last year and August 31st this year. Express Scripts, Cigna's PBM, Elavance Health, UnitedHealth Group, and CVS Health were all among those top 100 companies for hybrid work positions.
Some Medicare Advantage plans say that the turbulence facing the industry is not slowing them down. The CFO of Clover Health recently told Becker's that new risk adjustment rules from CMS and the 2 Midnight rule could have very little impact on the company. Clover Health is able to avoid the pressures other fan plans are facing because of its technology and its focus on PPO plans. Medicare Advantage plans have faced a lot of challenges in the past few years.
Major payers reported increasing medical costs driven by pent up demand for care delayed during the pandemic. In addition to rising medical utilization, plans are continuing with new reimbursement models from CMS. 2024 is the 2nd year of a 3 year phase in of readjustment model changes. Payers have said the change amounts to a cut in funding. Executives at Humana, the 2nd largest Medicare Advantage insurer, said the company has seen an increase in inpatient utilization because of the 2 midnight
rule. New CMS regulations took effect requiring Medicare Advantage Plans to provide coverage for an inpatient admission rather than observation when the admitting physician expects the patient to require hospital care for at least 2 midnights. And though Humana said the rule change was not the largest factor behind increasing inpatient admission costs, other insurers said the rule did not have a large effect on costs.
A smaller, more nuanced member population has meant that one health plan, CleverCare, has avoided rising utilization costs according to its CEO. She told us, Becker's, that their membership primarily consists of Asian Americans and Pacific Islanders, and their approach to health care tends to focus more on prevention. So they prefer, if possible, to avoid hospitalizations, so increasing utilization is not CleverCare's
biggest challenge right now. And while some smaller payers say they are shrugging off headwinds, UnitedHealth Group, the largest Medicare Advantage carrier, says it's poised to navigate the challenges in Medicare Advantage as well. The convergence of rising costs and lower reimbursements from CMS has led several insurers to exit markets that are no longer profitable. Humana is going to be exiting 13 markets affecting about 600,000 members, and Centene plans to exit 6 states.
CVS Health has projected it will lose up to 10% of its MA members. And insurers that aren't planning large scale market exits could pick up members from companies exiting markets and pulling back on benefits. In May, UnitedHealthcare CEO said that medical costs were in line with the company's expectations and that they're comfortable with the products that they're putting into the marketplace for next year.
Andrew Witty, the CEO of UnitedHealth Group, cautioned that it was too early to predict if the company would pick up growth from competitors' existing markets. And Elavance Health executives have also said they feel confident in the company's Medicare Advantage offerings saying that they're comfortable predicting market plus growth for the company's MA business in 2025.
They've also said they're encouraged by the commentary by some of their competitors around market rationalization and taking a hard look at the market because they know that others are potentially losing money this year. And finally, Florida's insurance commissioner has given the green light to Health Care Service Corporation to purchase Cigna's Medicare business in the state.
On September 11th, insurance the insurance commissioner in Florida signed a consent order approving the indirect acquisition of Cigna's HealthSpring of Florida by HCSC, which, of course, is the parent company of 5 Blue Cross Blue Shield plans. Cigna reached a deal in January to sell its Medicare business to HCSC for $3,300,000,000 that includes Cigna's Medicare Advantage supplemental part d and CareAllies, which is a value based care management subsidiary.
That will nearly quadruple HCA's Medicare Advantage membership. They've They've got about 217,000 MA members right now, and Cigna has just under 600,000. If you like the latest health insurance industry news delivered straight to your inbox every morning, subscribe to the Becker's payer issues enewsletter on our website atbeckerspayer.com.