While the market seems more mixed on this than me, I see this as a good thing for CVS Caremark. If played right, this could be a huge factor for 90-day retail and/or Maintenance Choice since Aetna (as the payer) will have huge incentives to take advantage of this.
I was a little surprised since most of the rumor had been that Medco was going down this path with Aetna and that this was what they had pitched to Wellpoint prior to the Express Scripts acquisition of the pharmacy business.
And, for those of you that have been around this space for a while, you might remember that Aetna did outsource some of their PBM business up until about 6 years ago when they insourced in from Express Scripts. I’d be interested to understand what changed (which might simply be in the finer points of this new agreement which doesn’t appear to sell assets but to leverage CVS Caremark’s scale).
It clearly points out that there are scale efficiencies in the PBM business something that I think will come to end in the near future (as predicted in my white paper a few years ago). So, I think the question a lot of people are asking is whether this move will accelerate different models to get to scale:
- A roll-up strategy of smaller PBMs by the large PBMs.
- A consolidation of smaller PBMs into coalitions and buying groups.
- Smaller PBMs contracting with larger PBMs for core services.
Let’s look at some of the PBM functions to think thru what makes sense to consolidate and leverage (IMHO):
- Sales – independent
- Marketing – independent although some physician or consumer marketing could be consolidated
- Implementation (Client Set-Up) – independent
- Research – drug trend, research studies, and analytics could be consolidated
- Plan Design – could be consolidated but not likely large efficiencies
- Drug Acquisition – consolidation would drive the majority of value
- Procurement – consolidation could add value
- Rebating – another big opportunity for consolidation but requires coordination on formulary (P&T) and other areas
- Mail Fulfillment – should offer consolidation benefits
- Call Center – should offer consolidation benefits
- Claims Processing – limited but possible consolidation benefits
- Clinical Reviews – easy to consolidate but minimal savings
I think given Express Scripts and NextRx and now CVS Caremark and Aetna (although different relationships) that this puts the spotlight back to Medco for the next move. I think the likely focus areas would be on Cigna and Prescription Solutions (part of United Health Group). After those two, there are other less likely targets – Prime Therapeutics, Walgreens (PBM), and MedImpact.