New prescription business helps fuel Anthem 2019 forecast

Anthem headquarters

Anthem headquarters

A surge in new enrollees in Anthem's Medicare business helped overcome declines in its commercial insurance sector to spur higher-than-expected profits in the fourth quarter. The announcement came amid a bitter feud with Express Scripts in which Anthem claimed the pharmacy benefit manager withheld billions in savings and overcharged Anthem $3 billion annually for its services.

Anthem said it expects IngenioRx, which was initially slated to launch in 2020, to produce gross annual pharmaceutical savings of more than $4 billion, with at least 80% of those savings falling to its customers in the form of lower healthcare costs and 20% falling to shareholders.

Pharmacy benefit managers, or PBMs, run prescription drug plans for employers and government agencies among other clients.

Indianapolis, Indiana-based insurer Anthem, which has almost 40 million members, has moved up the timeline on the development and launch of its own PBM known as IngenioRx, cutting ties with Express Scripts in the process, the company announced on an earnings call. But the relationship between Anthem and Express Scripts soured, and the insurer said in 2017 that it would create its own operation.

Express Scripts said it was disappointed that Anthem chose to end the contract ahead of schedule. Cigna's acquisition of Express Scripts allows Anthem to exercise an early termination.

Indianapolis-based Anthem Inc. runs insurance plans in several states, including big markets like California, New York and Ohio. It covers almost 40 million people, including those who receive benefits from the government-run Medicaid and Medicare programs.

While rivals Aetna Inc and Cigna Corp have made multi-billion dollar deals to manage patient prescriptions and bolster profits, so far Anthem is going at it alone.

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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.

Newshel said the accelerated transition could add 75 cents to 90 cents to 2019 earnings. That tops the average analyst forecast of $17.61 per share, according to FactSet.

Profits at the Indianapolis-based company in the three months through December were down 66 percent to $424 million, or $1.61 per share.

John Gallina, Anthem's chief financial officer, said on the call that beginning the migration on March 2 positions Anthem to have its members fully moved to IngenioRx by the first quarter of 2020, a full year ahead of previous plans.

The Blue Cross Blue Shield payer's fourth quarter earnings per share of $2.44 beat analysts' expectations and Anthem's stock price shot up almost 10%.

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.

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