Navigating the Current Pharmacy Market Consolidation

Top 3 Things You’ll Learn

  1. Key aspects to watch following the recent pharmacy benefit manager and health insurance carrier mergers
  2. Potential impact of mergers on pharmacy benefit carve-out pricing and contract negotiation abilities
  3. How market consolidation disruption could impact system performance and service levels

With the big three pharmacy benefit managers (PBMs) already comprising 77% of the market in 2018, it seems like everyone is talking about the recent CVS-Aetna and Cigna-Express Scripts mergers. Like us, you might be wondering what’s to come. While we aren’t sure what the true impact of these mergers will be on the pharmacy benefits ecosystem, we do know that there WILL be change. To help you navigate the changes, here are the factors we are keeping a close eye on:

  1. Consolidation disruption: When two companies come together, there is always consolidation to reduce redundancies and improve efficiencies. The new company won’t need multiple platforms, dual operational facilities, duplicate leadership positions, etc. – they will consolidate in the way that they believe makes the most sense to drive shareholder value. We can expect that the primary focus of CVS/Aetna and Cigna/Express Scripts will be on integrating their systems and service models, with limited resources spent on managing disruption in the new environments.
  2. Competition: When competing entities merge, it results in less competition within the market. With the newly formed mega-companies, there will be less room to negotiate pharmacy contracts for carved-out and carved-in business with those groups. You will see the impact of this in pricing offers, discounts, rebates, and guarantees. Because Aetna and CVS/caremark won’t bid against each other for pharmacy benefit carve-out business, for example, there will be fewer offers for you to evaluate.
  3. New business models: Given the current share of clients, each PBM’s business still will be mostly carve-out. For example, UnitedHealth Group still has its Optum division, which is dedicated to pharmacy benefits. However, these mergers have the potential to transform how healthcare is delivered, paid for, and managed. What that new model will be with these two new companies remains to be seen. CVS has announced that they plan to deliver additional preventative and maintenance healthcare services locally at their Minute Clinics inside drug stores, providing a variety of care. Patients could potentially benefit from a more seamless experience with insurance billing, payment processing, and pharmacy dispensing.
With the big three pharmacy benefit managers (PBMs) already comprising 77% of the market in 2018, the recent PBM-insurance carrier mergers created less room to negotiate pharmacy contracts for carved-in and carved-out business.

The Bottom Line…

Only time will tell what real changes occur at the pharmacy plan and employer group levels.

Learn more about the key players in the pharmacy ecosystem and where employers fit.

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