Reflecting on 2020 and Turning the Page to 2021
Saying 2020 was an unusual year is an understatement. Experiencing a global pandemic was not something on our radar and hopefully it will soon be behind us. National CooperativeRx fared well despite working through pandemic-induced challenges familiar to many. Strong growth, financial strength and finding ways to add value for members all persevered in 2020 in the face of these obstacles. In 2021, the legal and legislative arena warrants attention with rulings and actions that took place late in 2020. The Cooperative is excited to wrap up work on the Pharmacy Benefit Manager (PBM) Request for Proposal (RFP) and select a partner (or partners) for a contract beginning in 2022.
In 2020, 32 new members joined the Cooperative along with an expected count of 39,000 new lives. Though we are proud of growth exceeding 10% in this environment, these new lives largely replace losses due to pandemic-related downsizing of current members. At 370,000 total lives, we expect to exceed 400,000 lives with new member growth and a rebound in current membership counts as the pandemic ends.
Financially, reductions in revenues were more than offset by reductions in expenses. When final numbers are in and approved through the audit process later this year, we again expect to declare a significant dividend to membership in the area of $800,000.
Industry dynamics continue to offer opportunities for the Cooperative to find new ways to differentiate from other coalitions and add significant value over and above a PBM. Our growth and financial strength continue to make these innovations possible.
The market check negotiated in 2020 is expected to yield additional contract value of 4.3% for January 1, 2021. Work has already begun, and initial responses are in for a new contract to begin in 2022. There is significant work to do as the marketplace is competitive for a group our size. We expect to finalize the contract and release the results early in 2021. Our hope is with an early announcement any members who chose to check the market for themselves will have time for a thorough analysis. Provided games are not played, we are confident the Cooperative’s pricing and clinical oversight efforts will prove to provide unmatched value.
As contract savings continue to grow, so does the value from the Cooperative’s oversight role. Sparked by a member question, Cooperative staff investigated a coordination of benefits issue and recovered $1.2 million. This is just one example of how our exceptional service makes a financial impact to our members.
Rebates continue to be a significant portion of the prescription drug pricing equation, approaching 30% of gross costs, and the initial findings of the RFP prove these dynamics will continue. The Cooperative is continually auditing rebate payments and finding additional money owed by the PBM to our membership. These efforts resulted in two payments of true-up in 2020 for members who qualified, in addition to numerous corrections to guaranteed payments before being sent to membership.
Our clinical team continues to innovate to protect our members from fraud, waste and abusive spend. In addition to the bundle of oversight programs that saved members over $13 million in 2020, new programs were researched and developed in 2020. Our specialty high-dollar claim review program, added in 2020, has already unearthed several cost-savings opportunities for members and patients. Several of these have been for medications in excess of $100,000 for an annual course of treatment.
In 2021, we expect to roll out an enhanced utilization management program led by our clinical team. This optional program would allow the National CooperativeRx clinical team to react more quickly to marketplace dynamics and put in place appropriate controls on high-cost and new-to-market medications. Enrollment in the utilization management program proactively promotes higher value for patients and plans at a much faster pace. The current process involves educating employers each time appropriate controls are not immediately put in place by the PBM, getting paperwork signed, and waiting for the PBM to code the system.
New medication approvals are exciting for patients looking for new treatment or treatments for unmanaged conditions today. The concern for plan sponsors is the exponential increase in costs for some of these new therapies. There are more than a dozen drugs in the pipeline with approvals anticipated in 2021 where the market price tag is expected to be $200,000 or more for an annual course of treatment. For more highlights of the newest therapies coming to market, subscribe to our quarterly NCRx Pipeline Report.
Keeping benefit plans current continues to be critical. Like many of you, we have become well versed in virtual meetings. We welcome the opportunity to connect and discuss treatment options, plan performance, and offer perspectives to control costs.
There continues to be great opportunity for legislative action to fix shortcomings in the prescription drug marketplace that allow waste and inflated prices. To date, most happenings at the state and federal level are causes for concern rather than improvements for plan sponsors. Many state legislative proposals increase costs for plan sponsors and a recent Supreme Court ruling gives states increased jurisdiction over the Employee Retirement Income Security Act of 1974 (ERISA) protected plans. A legislative update will be provided during our virtual 2021 Annual Meeting on May 4.
As this year begins, there are many challenges to tackle in our industry. I am excited for the continued role National CooperativeRx will play in being a trusted resource in this opaque marketplace. We look forward to working with you in 2021 and beyond!
Josh Bindl is the Chief Executive Officer at National CooperativeRx, a pharmacy benefits purchasing solution to hundreds of self-funded member groups throughout the United States. A member-owned coalition, National CooperativeRx uses its industry expertise to provide patients and plan sponsors with solutions that lower costs and increase value.