2024 marks 20 years that National CooperativeRx has been providing expertise and purchasing power to plan sponsors. The Cooperative was founded by forward-looking employers and business groups searching for someone they could trust to navigate working with a pharmacy benefit manager (PBM). Today, working with a PBM is just a part of navigating the complexities of the entire pharmacy landscape. As we prepare for 2024, we reflect on where the Cooperative has come in 20 years.
An organization that started with no direct staff and eventually became a staff of one in February of 2004, now has 27 staff working in the best interests of plan sponsors. Deb Thomsen was involved in the creation and launch through her employment with one of the founding members. Deb Steele was the first employee hired by the Cooperative. Still with the Cooperative today, they are among the 27 staff members instrumental in our success.
The Cooperative hired its first pharmacist, Wayne Salverda, in late 2009. Wayne is a key part of the Cooperative today and is joined by five other pharmacists. Understanding medications and the value they provide patients is the first step in helping plan sponsors develop a pharmacy benefit that best fits the needs of their population. With the help of supporting staff, the clinical team has developed five oversight programs working to reduce fraud, waste, and abuse. The newest and most extensive program is our specialty prior authorization carve-out. A team of Cooperative pharmacists and other staff, led by Erica Guetzlaff, work in the best interest of patients and plan sponsors to review expensive specialty medications for appropriateness. We expect to add to our team of pharmacists in 2024 and will release metrics to demonstrate the successes of these programs.
The Cooperative was started by a dedicated group of six individuals offering their time to lay a solid foundation for the future of National CooperativeRx. Since then, many others have volunteered to take the baton, each leaving the Cooperative in a better position than when they joined. Today, we have eight invaluable individuals providing oversight and setting the Cooperative up for continued success. As we approach our May 2024 annual meeting, we are looking for new individuals to bring ideas and perspective to the Cooperative Board of Directors. Please reach out if you have interest.
January 1, 2004, the Cooperative began with just 8 groups and 7,579 lives. With 2024 new groups, we anticipate the Cooperative to be 480,000 total lives by March. Since last year, 42 new members joined the Cooperative, bringing an expected count of almost 60,000 new lives. Our growth delivers purchasing power and resources to expand our offerings. With strong membership renewals and growth for 2025, we expect to exceed 500,000 lives.
Since its inception, the Cooperative has returned $2.8 million to members in cash dividends and $3.1 million in retired equity. These are dollars in excess of what the Cooperative needed to run the organization. This strong financial performance continued in 2023, and we are again expecting a significant membership dividend. With various returns and recoveries, all passed through to membership, we expect to book net income of roughly $1 million for 2023.
Over 20 years, industry participants have introduced many new ideas to lower the cost of prescription drugs. The Cooperative is constantly assessing programs and developments in this marketplace. We do this on behalf of members, with a long-term outlook.
When the Cooperative was founded, generics were gaining traction and providing cost relief for what were then considered expensive brand medications. In today’s landscape, biosimilars are beginning to provide relief for expensive specialty medications. Plan sponsors should see higher conversion from Humira to lower-cost biosimilar competition in 2024. CVS’s introduction of Cordavis, a partnership with Sandoz to manufacture a biosimilar competitor to Humira, is certainly something to watch. Other high-spend medications will lose exclusivity in the coming years and see biosimilar competition introduced. Navigating this changing dynamic is important to maximize value for plan sponsors.
The Cooperative has long cautioned plan sponsors on the use of alternative funding vendors. As predicted, these dynamics saw a dramatic reduction in funds in 2023. This is leaving some vendors to manufacture new ways to demonstrate “savings.” International sourcing and taking credit for generic or biosimilar switches are two methods vendors are using to prop up promised “savings.” The Cooperative has not seen savings in international sourcing once rebates are factored in. Generic/biosimilar switches also occur without the involvement of these vendors and their ‘savings’ fee.
Medicare Part D was first approved in 2003 while the Cooperative was being formed. Similar to then, recent reforms in the 2022 Inflation Reduction Act are leaving those in the commercial market watching for spillover impact. Known are efforts by Pharma and independent pharmacy groups working at state and federal levels to pass reforms that increase costs and undermine ERISA preemption. Impacts vary by state, but some states are mandating specific PBM pricing models. The Cooperative works to analyze and implement these mandates while maximizing the protection of plan sponsors’ best interests.
National CooperativeRx works to combat trend and is laser-focused on management to drive to the lowest net cost of prescription medications. Through 2022, the average increase in Rx costs per covered individual, net of rebates, filled through the Cooperative, was approximately 1% annually. While 2023 brought new trend drivers, none bigger than GLP-1s, the Cooperative continued to provide its tried-and-true oversight and offer plan sponsors options to navigate these new developments.
Master Contract Improvements
Since the beginning, producing and maintaining a strong contract with a PBM has continued as a core function of National CooperativeRx. Our master agreement is almost 20 years in the making and includes very strong terms and definitions unique in the marketplace. Not only does it provide aggressive pricing, but equally important, it limits PBM pricing games. Market check efforts for 2024 yielded year-over-year contract savings of 4.1% for the average member group.
Initial RFP results are in for a new PBM contract to start January 1, 2025. Early indications are strong pricing improvements to help plan sponsors offset higher trend. While there is still uncertainty on where we will land, we are gathering intelligence on changing industry dynamics. Improved pricing on generics will limit the benefit seen by new entrants in the industry who try to benefit off a select list of drugs. Rebate guarantees coming in at inflated levels will be reduced by lower list price insulin and biosimilars through rebate credit language. The Cooperative worked to lock down rebate credit language for 2024 and will have the same focus with any PBM partner(s) in 2025.
National CooperativeRx was founded to bring purchasing power and expertise to pharmacy benefits management. We continue to innovate, promoting high-value spend for patients and plan sponsors. Everything we do is with our members’ best interests in mind. Thank you for being a part of National CooperativeRx’s success as we continue to solve the complexities in the prescription drug marketplace. We look forward to serving you in the new year and beyond!