Heading into 2017, CVS Health is facing significant headwinds in its retail pharmacy business—the result of some lost pharmacy benefit management contracts and being cut out of exclusive provider agreements. A recently announced alliance between CVS Pharmacy and OptumRx could make the going a little easier for the pharmacy giant and points to an increasingly competitive field when it comes to strategic partnerships among pharmacy retailers and benefit managers. In short: expect more of these deals as PBMs and pharmacies jockey for position and market share.
The agreement between OptumRx (a PBM owned by UnitedHealth Group) and CVS (which has its own PBM, CVS/caremark) will allow Optum members to fill 90-day prescriptions at 9,600 retail pharmacies nationwide at the same copays as Optum’s home delivery option, beginning July 1, 2017. The partnership also opens the door to collaboration on health and wellness programs—a common area of focus for CVS and OptumRx—and a shared pharmacy platform.
In the past year, CVS pharmacy has seen the loss of several contracts to its competitor Walgreens Boot Alliance. Walgreens struck strategic alliances with PBMs, including Prime Therapeutics and Express Scripts that left CVS left out of pharmacy networks. CVS also lost out to Walgreens on a contract for the TRICARE program, although it will continue to be part of Prime Therapeutics’ Medicare Part D pharmacy network (it will be listed as a non-preferred provider). In a third-quarter conference with investors, CVS officials said the pharmacy giant anticipates losing close to 40 million prescriptions in 2017 as a result the recent network exclusions. CVS Health has pulled back on its previously projected earnings per share of $5.81 to $5.89 to $5.77 to $5.83.
For OptumRx, the CVS deal should increase the company’s positive momentum. The PBM has seen significant growth in the past year. It was successful in securing some important contracts, including the CalPERS contract, which was previously held by CVS/caremark. The addition of Catamaran to its portfolio further enhanced its capabilities to include retail pharmacy network management, mail service pharmacy, pharmacy claims management, and patient-oriented specialty pharmacy services. OptumRx reported year-over-year revenue growth of 6 percent in the third quarter, with prescription fulfillments growing by 12 percent from the year-ago period.
Interestingly, OptumRx also partnered with Walgreens on a similar pharmacy solution model. In March 2016, OptumRx and Walgreens entered into a partnership, wherein OptumRx members were given the option of filling their 90-day prescriptions at any of Walgreen’s pharmacies at the same cost as Optum’s home delivery system.
The deal with Optum won’t fill CVS’s expected 40 million prescription gap, but it does address one of the concerns that have been raised—the perception of conflict of interest of a pharmacy chain that also owns a PBM contracting with its PBM competitors. Added to this mix is the potential for growth if Anthem is soon in the market for another PBM partner (Anthem has been at odds with PBM Express Scripts). If an aggressive CVS/caremark courts Anthem successfully, it would be a signature win, to say the least.
If nothing else, the deal between OptumRx and CVS signals that the former is charting an aggressive growth path and the latter is far from being counted out of the retail pharmacy game. For the PBM industry as a whole, competition will continue to heat up and it’s a reasonable assumption that unexpected alliances will become less unexpected.