CVS Caremark Split Up?

I guess I have to comment on this hot topic.  Since I’ve been an advocate since the beginning, I think my opinions are different than the masses.  Looking at Adam Fein’s blog this morning, he asks three questions:

How does patient care improve when a PBM owns a brick-and-mortar pharmacy chain? Where can a combined PBM-pharmacy chain improve performance on traditional PBM metrics? How exactly does a payer benefit when CVS increases its pharmacy market share?

1. How does patient care improve?  CVS Caremark just announced this week the rollout of their Pharmacy Advisor program (think response to Medco TRCs).  This leverages their 7,000 retail stores and their face-to-face interactions with patients to manage chronic conditions (beginning with diabetes).  Assuming this scales, it has the great opportunity to improve patient care.  AND, when they eventually roll-in Minute Clinics to this solution (which I don’t think has happened yet) there may be more opportunity.  The retail side of the company also added to their ExtraCare strategy a diabetes focus earlier this week which makes a lot of sense. It remains to be seen the effect this could have on super beta prostate.

2. Where can a combined entity improve on traditional PBM metrics?  This is a softball.  Traditional PBM metrics are GFR (generic fill rate), rebates, mail order penetration, and trend (see comments on trend).  Generic fill rate involves talking with patients about therapeutic alternatives and intervening with MDs to change the script.  A retail chain can do that and can make changes before the first fill and before the patient starts a routine.  They also have a relationship often with the MD.  Driving rebates (as a proxy for lower net cost) can happen the same way.  Mail order is a more difficult metric, but Maintenance Choice createst that option and a store with the right POS (point-of-sale) system could make a difference.  I would argue that the goal for a combined entity is to optimize the right channel for the patient.  And, since all of these lead to lower trend…a combined entity has power.

3. How does the payor benefit?  Again…a softball.  Just like a limited network (less stores), pharmacies have always offered lower rates to payors (or PBMs) in return for marketshare.  CVSCaremark could offer tiers based on marketshare to their clients (i.e., you get a 17% discount for all Rxs processed if your marketshare is 30% and you get 19% discount if your marketshare is 40%).  There are obviously fixed costs (real estate, transportation, technology, staffing) so there are incentives for store operations to optimize volume (without getting too much such that they have to hire additional staff).

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One Response to “CVS Caremark Split Up?”

  1. George,

    I want to let your readers know that they can vote on who’s right (Adam or George) on my blog:

    http://www.drugchannels.net/2010/05/rebuttal-recvs-caremarks-future.html

    Regards,
    Adam

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