March 14, 2009 
Thanks for all the questions lately. I love to answer them (although I get backlogged sometimes with the real job).
Someone asked me why the PBMs got into specialty pharmacy over the past 5+ years.
- Commoditization
- Money
- Opportunity
As the traditional PBM business continued to get squeezed and “transparency” was being pushed, there was a fear of commoditization. That fear caused the PBMs to look more aggressively at what companies like CVS had been doing in the specialty pharmacy world.
The PBMs have typically been very financially motivated. If you look at the basics, there is clear financial opportunity.
- The value of an average specialty script is $1,200+ versus $80 for a normal script.
- The majority of the scripts traditionally were filled outside the pharmacy network on the medical side creating lots of opportunity for cost management (and therefore spread).
- Some specialty drugs have limited distribution meaning that you can be the only pharmacy (or one of a few) that stock the drug driving immediate marketshare.
Finally, to a lesser extent, I believe specialty created an opportunity for them to showcase more “care management” types of activities. They could work more actively with the patient (member) to save them money and help them deal with their chronic condition.
Enabling Healthy Decisions 
A comment I got from a friend in specialty through Plaxo…
“Keep in mind that in the old days, the PBM’s lost control over the patient. But let’s not lose sight of the fact that the loss of patient means loss of revenue. What this however has really led to is the commoditization of specialty. Now we hear that the big specialties are struggling to provide the level of service they provided 5 years ago or so as they are focused on production volume and the cost of service. What we will continue to see is the evolution of niched specialty pharmacies which will focus on certain disease states or service models to fill the gap of service on the more complex disease states.”
I have compared specialty pricing against Medicare ASP for several PBMs. Typically, they charged an average of 6% higher than Medicare. The lowest was 3% more and the highest was 9% more.
Good point Frederick. I guess what I meant was that it was not out of some desire to improve overall healthcare outcomes. Perhaps naive, but I assume some healthcare companies actually care to improve outcomes first and make money second.
You wrote:The PBMs have typically been very financially motivated.
You say this like there are companies who are not?