New prescription business helps fuel Anthem 2019 forecast
INDIANAPOLIS (AP) — The Blue Cross-Blue Shield insurer Anthem topped fourth-quarter earnings expectations and unveiled a better-than-expected 2019 forecast, helped by an early start for its prescription drug coverage business.
Shares of the nation’s second-largest health insurer soared after Anthem said Wednesday that it will start moving customers into its new business in this year’s second quarter, several months ahead of schedule.
The insurer has said that it expects to gain annual savings of more than $4 billion by running its own pharmacy benefit management operation, which it calls IngenioRx.
Wednesday’s announcement means the company will start accumulating savings faster than expected, Jefferies analyst David Windley said in a research note.
Pharmacy benefit managers, or PBMs, run prescription drug plans for employers and government agencies among other clients. They use their large purchasing power to negotiate prices and shape formularies or lists of covered drugs.
Anthem had sold its PBM business to Express Scripts in 2009 and then had that company run prescription benefits for its customers. But the relationship between Anthem and Express Scripts soured, and the insurer said in 2017 that it would create its own operation.
Anthem initially anticipated a 2020 start for its PBM business, which it will run with help from CVS Health Corp. But it said Wednesday that it was ending its deal with Express Scripts on March 1 due to that company’s recently completed acquisition by another insurer, Cigna Corp.
Indianapolis-based Anthem Inc. runs insurance plans in several states, including big markets like California, New York and Ohio. It covers nearly 40 million people, including those who receive private insurance or benefits from the government-run Medicaid and Medicare programs.
Anthem’s move back into pharmacy benefits comes as rivals Aetna and Cigna bulked up their own prescription processing through multi-billion dollar deals. Meanwhile another competitor, UnitedHealth Group, also operates one of the nation’s biggest PBMs.
Insurers are delving deeper into pharmacy benefits as part of a broader push to control health care costs. A PBM and its prescription data can give insurers a better picture of customer health. That can help them manage care and improve or stabilize patients who are in poor health or dealing with chronic conditions.
Anthem’s accelerated launch of IngenioRx is reflected in the 2019 earnings forecast it debuted Wednesday. The insurer said it expects adjusted earnings in the new year to be better than $19 per share. That tops the average analyst forecast of $17.61 per share, according to FactSet.
In the recently completed fourth quarter, Anthem saw its profit fall 66 percent to $424 million compared to the end of 2017, when the insurer and other companies recorded big tax gains.
Earnings adjusted for one-time items totaled $2.44 per share in the most recent quarter while operating revenue, which excludes things like investment income, grew nearly 4 percent to $23.3 billion.
Analysts expected, on average, earnings of $2.20 per share on $23.36 billion in revenue, according to Zacks Investment Research.
Anthem shares jumped 12 percent to reach a new all-time high price of $305.99 Wednesday morning while broader markets rose less than 1 percent. Anthem shares had already climbed 4 percent so far this year.
Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on ANTM at https://www.zacks.com/ap/ANTM