Post ESRX/MHS Merger – How Many Big PBMs Are There?

This seems to be one of the critical questions in the evaluation of whether the merger should go through.  We’ve always talked about the Big 3 PBMs – Express Scripts, Medco, and CVS Caremark.  If that’s the market, then going from 3 to 2 seems like a huge deal.

But, I think the market has and is changing.

  • What about OptumRx (formerly Prescription Solutions)?  Once the lives formerly managed by Medco are insourced in 2013, this is going to be > $20B company (I believe) which is part of a huge company (United Healthcare).
  • What about Prime Therapeutics?  They manage over 14M members (I believe) and have been actively bringing in lots of new management from other PBMs as part of their growth strategy.
  • What about SXC and CatalystRx?  They both have shown their ability to win against the “Big 3” and grow.
  • What about “captive PBMs” like Humana and CIGNA?  I think they would both want a bigger crack at the lives outside their insured book of business.
  • What about MedImpact?  They manage 35M lives today.
There are dozens of other PBMs that have shown success in the market – ReStat, WelldyneRx, Navitus.  I guess it also depends on whether you view the market as just PBMs or you look at it for drug spend in which case cash patients play into the mix and you look at what companies like Walgreens, Walmart, CVS, Target, and RiteAid do.  [One could hypothesize that in a >80% generic world that cash is really the dominant method since insurance discounts matter much less and the role of the PBM or PBA is more around claims coordination for utilization management and DUR.]
Ultimately, I think it boils down to whether size gets you unfair advantages in pricing and discounts (i.e., rebates, acquisition cost, network discounts).  I would suppose that Worker’s Compensation is an area to look at where there are dozens of smaller WC PBMs competing with Express Scripts – MyMatrixx, PMSI, CypressCare.  What’s their experience been?

Today’s session in DC will certainly be interesting.

[As noted before, I both own shares in some of the companies mentioned here and do business with others and/or seek to do business with the companies mentioned here.]

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