New Pharmacy Whitepaper: Innovate Or Be Commoditized

In early 2009, I published an initial whitepaper on the PBM industry.  With all the changes going on in the industry, it seemed relevant to put out a new whitepaper although the total impact of reform and the definition of MLR is still TBD.  As I did before, I’m putting a summary here, and I welcome your comments.

You can download the whitepaper by registering on the adherence site at Silverlink Communications.  Thanks.  [If you’re a regular reader but not a logical client, you can request the whitepaper by contacting me.]

I think a quote from Larry Marsh (Managing Director, Equity Research) at Barclay’s Capital does a good job of summarizing it:

“Innovation will be increasingly important in the PBM world, as these companies seek to solve a greater set of pharmaceutical cost issues for their customers over the next 10 years.”

[BTW – If you want to get updates e-mailed to you as I post them, you can sign up here.]


Innovate Or Be Commoditized: The PBM and Pharmacy Challenge for 2011

Doing more with less; dealing with constant change; and having technology be a part of everything…  Those are things that the next generation will take for granted.  For the rest of us, those are dynamics that are changing our personal and professional lives.  We’re constantly bombarded with information and decisions to make.

While the pharmacy industry has generally avoided the collapse of the automotive industry and the radical change of the health insurance industry, we’ve seen unprecedented change in the past few years.

It’s almost impossible to go a few days now without seeing information about prescription drugs in the mainstream news.  You might hear a financial analyst talking about the lack of blockbuster drugs in the pipeline.  You might read about a drug recall in USA Today.  You might see a new report talking about the $290B cost of non-adherence[ii] to the country.  Or, it might simply be water cooler discussions around how more than 25% of kids[iii] now take a prescription medication or how non-adherence can lead to hospital readmissions[iv].

This has raised the average consumer’s awareness of the industry and continues to push the trend of consumerism with which the entire healthcare industry is dealing.  Most of us in the industry already knew that pharmacy was the most used benefit (12 Rxs PMPY for PPO members[v]) and believed that pharmacists were a critical part of the care continuum.

The challenge now is for the industry to demonstrate their value beyond simple trend management.  The growth in generics will slow down while specialty spending grows.  Pharmacy and pharmacists have to become critical path in the care continuum and demonstrate how they engage consumers to improve outcomes.  It will become increasingly important to link outcomes and reimbursement as CIGNA Pharmacy did in their diabetes deal with Merck[vi].

[i] “Still More Pharma Jobs Go By The Wayside”, Pharmalot blog, posted on Nov. 3, 2010,

[iii] Berkrot, Bill, “Prescription Drug Use By Children On The Rise”, Reuters, accessed on 1/4/11,

[iv] Leventhal MJ, Riegel B, Carlson B, De GS., Negotiating compliance in heart failure: remaining issues and questions, Eur J Cardiovasc Nurs., 2005;4:298–307 (abstract online at

[v] Managed Care Digest Series: Key Findings, last updated Nov. 2010,

[vi] “CIGNA and Merck Sign Performance-Based Agreement”, CIGNA Press Release from April 23, 2009,

2 Responses to “New Pharmacy Whitepaper: Innovate Or Be Commoditized”

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  1. The Era Of The Two-Tier PBM Strategy | Enabling Healthy Decisions - June 27, 2014

    […] I’ve been beating the drug of the risks of commoditization to the market for years, I’m going to make a nuanced shift in my discussions to say that there is still a risk of […]

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