Express Scripts, which manages pharmacy benefits for roughly 100 million people, claws back millions of dollars per year from pharmacies, according to a contract obtained by Axios’ Bob Herman.

Why it matters: Express Scripts says it passes all of these pharmacy fees back to its clients, rather than hanging on to them as profit.

• But even high-performing pharmacies are penalized, and they have little control over the terms of these agreements.

How it works: The contract Bob obtained applies to Express Scripts' Medicare plans and the pharmacies that participate in its network.

• A third party grades pharmacies' quality by determining, for example, how many of their patients receive or refill their needed medications.
• Only the top 1% of pharmacies incur no penalties. The other 99% have to write checks back to Express Scripts, according to the contract.
• The top 2%–15%, which Express Scripts deems "high performers" in the contract, have to pay back 2% of a prescription's price. The next 60% of pharmacies have to pay 4% of a drug's price, and the lowest performers concede 6%.

The other side: Express Scripts said in a statement to Axios that "high-performing pharmacies can and do earn more money."

• It's worth mentioning that the largest PBMs — Express Scripts, CVS and OptumRx — also own pharmacies.
• Express Scripts did not make executives available for interviews and would not answer follow-up questions.

Flashback: Loyal readers may remember that this is the second time Bob has gotten ahold of an Express Scripts contract. You can read his previous series here.

Want to read the contract? Email [email protected]. (And of course, feel free to drop him a line if you have more information to share.)

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It's going to be a long day today for the Senate Finance Committee, and after that, a long September.

Driving the news: Finance members have filed 110 amendments for today’s drug-pricing markup. They run the gamut from requesting government reports to making technical changes to new, major, controversial policy ideas.

• The committee will only end up debating a fraction of those amendments, but still, don’t expect this process to be swift.
• Health and Human Services Secretary Alex Azar is making calls to persuade skeptical Republicans to support the bill, according to The Hill.

What's next: Surprise medical billing will join drug prices on Congress’ fall schedule. When it rains, it pours.

• The Senate health committee passed its response to surprise bills last month, and Chairman Lamar Alexander (R-Tenn.) had suggested a floor vote could come before the August recess.
• But that schedule has slipped, Modern Healthcare’s Susannah Luthi reports. Sen. Bill Cassidy (R-La.) is trying to make the bill more friendly to providers, with a more flexible option for arbitration in payment disputes.

Anthem posted better-than-expected earnings and raised its profit expectations for the rest of 2019, so Wall Street responded by … selling off the stock, dropping Anthem’s share price by 4.5%.

What gives? Investors are freaking out, Bob writes, because the big health insurance companies — UnitedHealth Group, Centene and now Anthem — have indicated their medical costs are rising faster than projected.

By the numbers: One of the most highly watched metrics for insurers is the medical loss ratio, which shows how much of members' premiums are going toward paying medical claims.

• Anthem’s MLR in the second quarter was 86.7%, meaning almost 87 cents of every premium dollar went to cover someone’s medical expenses. That was higher than the 85.8% that Wall Street analysts had expected.
• 0.9 percentage points may seem like a small difference, but that translates to roughly $200 million in unanticipated claims, given how large Anthem is.

Anthem argued that health care expenses aren’t rising wildly, but instead states are not paying high enough Medicaid rates to their plans.

The bottom line: Wall Street's latest sell-off is yet again obscuring the financial and political power insurers enjoy.

Private equity firms are snapping up dermatology practices, and at least some health care experts are not thrilled about it.

By the numbers: More than 700 dermatology practices are now owned by private equity. The number of takeovers increased 12-fold from 2012 to 2017.

What they’re saying: That rapid pace raises a lot of questions about what will happen under private equity firms’ quest for rapid growth, and the consequences once they sell, former deputy FDA commissioner Joshua Sharfstein writes in a JAMA Dermatology editorial.

• “At the current pace, by the time more is understood about the takeover of dermatology practices by private equity firms, it will likely be too late to change course. Efforts to protect the field of dermatology and the American public from the potential adverse consequences should begin now,” he wrote.

Between the lines: It’s not just dermatology. Private equity firms have big health care appetites generally.

• One big difference, though: They’ve previously gravitated toward emergency services and ambulances — services that, if you need them, you’re in no position to turn them down because of the price.
• Dermatology doesn’t quite fit that bill, but it’s nevertheless a lucrative specialty.

Go deeper: Private equity's thirst for health care providers

A handful of drug companies with big vaccine portfolios are especially well-positioned to capitalize on the effects of climate change, according to a Morgan Stanley investors’ note.

The big picture: As I wrote earlier this year, climate change will be a business opportunity for some pharmaceutical companies.

• That’s nothing cynical — infectious diseases will spread faster and farther as the climate warms, and we treat infectious diseases with drugs.

The bottom line: Vaccine development is hard and expensive, so companies that are already in that business will have an upper hand, Morgan Stanley’s analysts wrote.

• Sanofi and GlaxoSmithKline are at the top of the heap, the bank says, given their existing pipelines and manufacturing capacity.
• Takeda and Merck both have vaccines in the works for dengue fever, one of the diseases that climate change is likely to exacerbate.
• Janssen and Pfizer are both active in the vaccines market, but would need to establish new research programs to take on tropical diseases, per Morgan Stanley.