FEHB is a big deal and very positive:
To all FEHB Carriers
From The U.S. Office of Personnel Management
Healthcare and Insurance
March 20, 2014
"It has come to our attention that many FEHB carriers exclude coverage of weight loss medications. Accordingly, we want to clarify that excluding weight loss drugs from FEHB coverage on the basis that obesity is a "lifestyle" condition and not a medical one or that obesity treatment is "cosmetic"- is not permissible."
Insurance reimbursement has been targeted by Eisai (OTCPK:ESALY), because it plays a key role in the success of Belviq sales. Currently at 50%, the FEHB letter should be a big positive in moving Eisai to the goal of 70% insurance coverage for Belviq in 2014, and getting there ahead of schedule.
To understand why the FEHB letter is a very big deal for Arena (NASDAQ:ARNA) and Eisai and Belviq sales, we need to know, who is the FEHB and who got the letter? The Federal Employees Health Benefits (FEHB) Program is a system of "managed competition" through which employee health benefits are provided to civilian government employees.
The FEHB program covers about 4 million Postal workers, IRS agents, etcetera and another 4 million dependents, for a total of about 8 million people. FEHB pays roughly 70% of the premiums. 8 million HMO members moving toward Belviq coverage is not bad, but what is interesting is the number and size of the health plans involved.
According to Walton Francis in his book Putting Medicare Consumers in Charge, Lessons From the FEHBP, there are 250 carriers, or health plans in the FEHB Program.
Who are these 250 health plans that received the letter from FEHB?
Now these 250 plans have to file a form called a HEDIS with FEHB if they have more than 500 plan participants. I counted 87 filers of Hedis, leaving 163 plans with less than 500 participants. Even if all 163 plans had the maximum 499 participants, it does not add up to much of anything in terms of patients [499 X 163 =81,337 FEHB participants out of 8 million = less than 1%]. So for these 163, it is not the number of patients that matter, it's the decision. 163 health plans that must now set policy on Belviq. 163 health plans need to make a decision on Belviq, and who will help them with that decision?
The Eisai reimbursement team.
The 87 plans with 500 or more plan participants comprise 99% of the FEHB program, with an average 92,000 participants each.
Here are the 87 BIG plans who received the FEHB letter:
Aetna Open Access
Altius Health Plans
APWU Health Plan
AvMed Health Plans
Blue Cross and Blue Shield Service Benefit Plan
Blue Preferred Plus POS
Blue Shield of CA Access+HMO
Bluecare Network of MI
Capital Health Plan
CDPHP Universal Benefits, Inc.
Compass Rose Health
Coventry Health Care
Coventry Health Care HDHP
Coventry Health Care of Iowa
Coventry Health Care of Kansas
Coventry Health Care of Louisiana
Coventry Health Plan of Florida
Dean Health Plan
Foreign Service Benefit Plan
GEHA Benefit Plan
Geisinger Health Plan
GHI Health Plan
GHI HMO Select
Grand Valley Health Plan
Group Health Cooperative
Health Alliance HMO
Health Alliance Plan
Health Net of Arizona, Inc.
Health Net of California
Health Plan of Nevada
HealthPartners High and Standard Option
Heart of America Health Plan
HIP of Greater New York
HMO Health Ohio
Humana Benefit Plan of Illinois, Inc.
Humana Employers Health of Georgia,
Humana Health Plan Inc.
Humana Health Plan of Texas
Humana Health Plans of Puerto Rico, Inc.
Humana Medical Plan, Inc.
Independent Health Assoc
Kaiser Foundation Health Plan of Northwest
Kaiser Foundation Health Plan Mid-Atlantic States
Kaiser Foundation Health Plan of California
Kaiser Foundation Health Plan of Colorado
Kaiser Foundation Health Plan of Georgia
Kaiser Foundation Health Plan of Hawaii
Kaiser Foundation Health Plan of Ohio
KPS Health Plans
Lovelace Health Plan
MVP Health Care
Optima Health Plan
Panama Canal Area Benefit Plan
Physicians Health Plan
Physicians Health Plan of Northern Indiana
Piedmont Community Healthcare
Presbyterian Health Plan
Rural Carrier Benefit Plan
Sanford Health Plan
The Health Plan of the Upper Ohio Valley
Union Health Service
United Healthcare of the Midwest, Inc.
UnitedHealthcare Benefits of Texas, Inc.
UnitedHealthcare of California
UnitedHealthcare Plan of the River Valley Inc.
UPMC Health Plan
Kaiser California, for instance, has 7,252,462 members, and currently does not cover Belviq. Coventry Health Care of Florida does not cover Belviq, and has 310,000 members. Blue Shield of California has 2,953,200 members, and currently does not cover Belviq. Those are just 3 examples out of 87.
It is likely that half the above plans have already made a decision on Belviq coverage, like Aetna did, but here is what's important: What this FEHB letter does is create a "Belviq decision time" for a large number of the above health plans.
Many health plans were likely waiting and watching the obesity space before making a commitment on Belviq. This is a grand opportunity for the Eisai insurance reimbursement team to move that payor coverage from 50% to 70%. More Payor coverage equals more Belviq sales.
"Securing broad reimbursement coverage for patients is an important part of the foundation for the long-term success of BELVIQ in the United States, and Eisai has continued to demonstrate its expertise in this area," said Jack Lief, Arena's president and chief executive officer.
And this FEHB letter is a very large opportunity for the Eisai reimbursement team. I would expect this FEHB letter to move Belviq insurance coverage to 70% in the next 4 months, well ahead of schedule.
Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.