May 2020 Snapshot: The Impact of COVID-19 on Health Plans From a Pharmacy Point-of-View


The impact of COVID-19 on the health plan enterprise appears to be practical and functional rather than strategic and financial.

Despite the unprecedented impact of coronavirus disease 2019 (COVID-19) on the economy and society, its impact on the health plan enterprise appears to be practical and functional rather than strategic and financial. This conclusion comes from a pilot study with health plan decision-makers.

Although multiple changes within the health plan enterprise were cited, the consensus was, as one respondent noted, it is “business as usual."1 The changes cited are discussed below.

Work Process

Not unlike the workforce nationally, the biggest change is the majority of staff now work remotely. Issues routinely resolved with a passing conversation are now handled through phone calls, email, and instant messaging. Meetings are conducted via video conference.

From the standpoint of work process, the priorities that appear to be the most important are maintaining continuity with existing initiatives and ensuring that COVID-19 initiatives proceed expeditiously. Consistent with the continuity theme, there may be a tendency for negative formulary changes to be delayed 3 months (ie, moving a product from formulary to non-formulary) so patients have more time to adjust.

The suggestion here is that continuity and COVID-19 actions will remain the top priorities currently, but other priorities health plans had before the pandemic are likely to gain traction in some phased way once remote working gains greater maturity.

Implications for Manufacturers

The most obvious implication is that meetings with health plans will be replaced by video conference for the foreseeable future. As a result, producing an effective video conference is likely to become an important core competency.

Given a wide range of topics, key attributes that create a successful video conference can be expected to vary. Video conferences centered on a new indication versus a financial issue versus new health economic data versus patient adherence are each likely to be optimized with some variation in narrative structure and data presentation. One-size-fits-all could get tired, very quickly.

Since a remote working landscape likely translates to a “one shot on goal” reality, identifying critical success factors for core topics in video conference presentations merits explicit consideration by manufacturers.

A second implication from health plans’ remote working has more explicit business ramifications. Health plans might not have the appetite to partner on new value-based contracting opportunities as they had before. With management and staff drawn into COVID-19 demands, they have less bandwidth to act on more complex contracting arrangements.

Closely related to this last point, plans appear likely to favor greater upfront transparency in contract discussions and look less favorably on protracted negotiations.2 There may be exceptions—super high-cost specialty pharmacy treatments, plus gene and cell therapies, for example, in which outcomes discussions are needed—but at least for the balance of this year, the “keep it simple” principle for most contracting is likely to be preferred by health plans.


Health plan expenditures do not appear to be adversely impacted by COVID-19. One respondent cited a 20% reduction in medical expenses in April compared with February.3 A second estimated 25%.4 A third indicated a 15% total reduction in services for March, 30% for April, and 30% projected for May.5 With state mandates that prohibit elective surgery varying across the country, plans in some states will see greater savings than others.

When elective surgeries that had been delayed eventually hit the system, the increased volume appears more likely to be stretched out rather than spike. This can be attributed to 3 factors:

1) More acute conditions addressed first.

2) Patient caution holding back demand until there is a vaccine.

3) Facility caution because of reputation and liability issues tied to non-symptomatic staff and the risk of infecting non-infected patients.

Consequently, the interpretation here is that increased COVID-19 health plan expenditures and expenditures related to elective procedures should be adequately absorbed in the current multi-year profit and loss cycle. This is consistent with a recent Moody’s assessment of industry financials, stating that “US health insurers will nonetheless remain profitable under the most likely scenarios.”6


To date, although there may be a tendency for health plan medical expenditures to not be adversely impacted by COVID-19, there are signs the pharmacy side may be seeing some short-term increase. Where pharmacy has increased, it can be attributed to:

  • Patients stocking up on medications in anticipation of potential shortages.
  • Plans instituting early refill overrides to block edits that normally require 80% use.
  • Pharmacy departments promoting 90-day supplies through: member outreach and adding a 90-day option to benefit language where it did not exist.

Implications for Manufacturers

Where health plans have pivoted to 90-day policies, it’s not unreasonable to assume 90-days could become more of a standard practice going forward. That, combined with more liberal refill policies, point to 2 business implications for pharma:

  • Real world data: Without the complicating factor of inconsistent medication possession ratios across a treatment population, 90-day refill policies introduce an opportunity to more systematically track patient outcomes and drive patient engagement.

  • Variation in high-cost drug refills: Respondents were split on how they applied more liberal refill and 90-day policies. At one end of the continuum are early refill and 90-day supply policies for specialty and non-specialty agents. At the other end are policies that do not allow early refills or 90-day supply for specialty medications, but do for non-specialty. Midpoint are policies that allow an additional 28-day refill for specialty products but not a 90-day supply, while allowing 90-day supplies for non-specialty products.

Manufacturers would benefit from monitoring these developments and exploring ways to deepen contracting relationships that align with how plans promote expanded supplies.

Other Key Business Factor Developments

Maintain Commercial Membership

Plans are working with employer groups having a hard time paying premiums. One respondent estimated 15% of accounts are having difficulty, and a “few percentage points” have lost coverage entirely.7 Another respondent put the number of lost accounts at less than 5%.8

Implications for Manufacturers

Where health plans are modifying payment schedules for some portion of their small group commercial accounts, they may need to have that development somehow mirrored in their manufacturer relationships. Whether it involves high-cost specialty pharmacy products, insulin or lower cost chronic use medications, there is a cascading effect from employer financials to health plans to patient health.

This issue merits manufacturer attention because it introduces the idea of partnership taking on a different financial dimension with health plan customers.9

Shift to Medicaid and Affordable Care Act (ACA) Markets

No numbers were mentioned but multiple comments pointed to health plans anticipating growth in their Medicaid enrollment in 2020 and into 2021. For smaller regional plans, this will likely mean a drop in Commercial enrollment; for national plans, it could mean a sizeable increase in their Medicaid business line.

In addition to Medicaid, a potential future scenario appears to be ACA markets gaining share from the small group, self-funded market. Prior research the author conducted pointed to groups with 3000 and fewer lives beginning to consider whether exiting the self-funded space is a viable option because of high-cost cancer treatments and future risk from gene and cell therapies. The financial impact of COVID-19 could advance that thinking.

Implications for Manufacturers

For pharma brands, impact from the above developments can materialize in at least 3 ways.

  • Revenue model: Given the magnitude of discounting in Medicaid, to the extent share migrates from Commercial to Medicaid, brand managers may need to revise their revenue models.
  • Closed formularies: With closed formularies being standard in Medicaid, and widely used in the ACA markets, non-contracted products may be grandfathered for 3 or even 6 months, but eventually patients will lose access.
  • Continuity of care challenge: Patients with cancer and other patients in the orphan disease space are unlikely to face continuity of care issues if new coverage involves closed formularies. However, that principle does not apply to patients generally. Consequently, brands having “access” as a business objective, may need to build contracting and being on formulary into their strategy going forward.

New Product Launches

COVID-19 has disrupted the environment for product launches and respondents did not point to any natural rebound—any “V-shaped” turn—to more favorable conditions for the remainder of the year. What they did point to was a need for manufacturer adjustment and flexibility.

For example, since scheduled P&T reviews will take a back seat to any treatment or vaccine that health plans need to address, new products “could see a delay in their drug getting P&T review and default to non-preferred or non-formulary/medical exception status for a period of time.”10

Implications for Manufacturers

The suggestion here is that existing axioms in the payer pharmacy space could take on greater weight and be less forgiving than under normal circumstances.

  • More accommodating to clinically significant benefits and less to benefits that rest solely on statistical significance.
  • More receptive to presentations that firmly establish clinical role and fit in standard of care, and more hesitant where only adequately established.
  • Open to drawing on health economic data that are real-world, peer reviewed, and clearly generalizable and openly skeptical of data that are not.

Final Point

The COVID-19 pandemic is multi-track, including but not limited to crises in population health, the health system, the economy, and personal finance. As science gains the upper hand, the recovery will likely be uneven. In addition, key constructs shaping market behavior—such as cost-benefit, trade-offs, financial thresholds, priorities, and partnership—could, in various ways, change. Understanding these developments will require further inquiry and additional insight. Optimal performance in the COVID-19 landscape will require that understanding as well.

About the Author

IRA STUDIN, PhD, MPH, is president of Stellar Managed Care Consulting. Stellar is a business strategy consulting firm specializing in qualitative market research for the pharmaceutical industry in the payer and hospital channels. Dr. Studin can be reached at


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