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Perspectives on PBM Consolidation (Pt. 2)

Posted by Matt Breese on Sep 6, 2016

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Before the holiday, we discussed PBM consolidation and its effects in the pharma and healthcare landscape.  Today, we continue that discussion.

The Effects of Mergers

As a result of the ExpressScripts/Medco and UnitedHealth/Catamaran Rx mergers, one billion scripts — 75 percent of the U.S. total — is now controlled by three players: ExpressScripts, UnitedHealth OptumRx and CVS Caremark. That leverage means pharmaceutical manufacturers more frequently find themselves at a negotiating disadvantage and are giving up larger discounts to get advantageous formulary placement. Plans and payers, however, may see value in the mergers if it means lower costs, especially on new and pricey treatments.

“Working together,” said Larry Renfro, CEO of UnitedHealth’s health services division, “we have the opportunity to make specialty drugs more affordable for clients and the people we serve.”

Anthem and Aetna are the newest entries in the merger/acquisition strategic dance to gain leverage by joining the ranks of the country’s largest PBMs. However, legal woes may get in the way. In March of this year, Anthem sued ExpressScripts over drug pricing that it claims is higher than competitive benchmark pricing and asked the courts to declare its right to terminate its contract with ExpressScripts.

Two months later, two health-plan participants sued both companies for alleged overbilling. At the same time as these lawsuits began making their way through the courts, Anthem began negotiating the acquisition of Cigna Corp in an effort to build a large PBM using Cigna’s PBM as the foundation.

Aetna also announced its plan to grow a larger PBM after it finalized its merger with Humana was finalized. However, with the U.S. Department of Justice stepping in to stop both mergers on antitrust grounds, the outcomes of both mergers are in limbo.

A Competitive Advantage

The interest in gaining a competitive edge is a natural instinct for health plans and payers who are looking for ways to help employers and government health programs better coordinate care and manage drug costs for their covered lives.

Because bulk buying and negotiating from a position of strength is a benefit primarily reserved for the big three PBMs, smaller PBMs will continue to investigate mergers, acquisitions and other strategies to build a power base and gain some leverage with pharma.


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Topics: Industry Trends, Payer