2012 may well be the year that the pharmacy benefits management business takes a dramatic turn into new territory. Five years ago, small health-plan-owned PBMs such as Regence Rx and FutureScripts were part of a crowded field of competitors.

Today, it's not so crowded, particularly with the April 18 announcement that SXC Health Solutions plans to purchase competitor Catalyst Rx for $4.4 billion. The merger of the two midsize PBMs would create a company with some $13 billion in annual revenue and annual script volume of some 200 million.

Over the past few months, companies like SXC, Catalyst, Prime Therapeutics, MedImpact and others have snagged significant contracts (although they've lost their share, too) because of the upheaval in the market, namely the newly minted merger of Express Scripts and Medco.

That merger, which federal regulators approved in early April 2012, creates a mega PBM with a 1.73-billion prescription claim volume, versus 775 million for its next-biggest competitor, CVS Caremark. Two of the three federal regulators who signed off on the ESI/Medco deal said they believed there was enough competition to ease anti-trust concerns.

That's quite possibly true, but the landscape is changing dramatically. Within a year, the market may be divided into three or four big players: ESI/Medco, competing for large-group and health plan business; Prime Therapeutics, representing most of the Blue Cross Blue Shield covered lives; SXC/Catalyst, specializing in fee-for-service Medicaid; and CVS Caremark, competing for all of the above, but also the only one of the group with its own pharmacy chain.

Each of the PBMs essentially does the same work as the others: assembling a pharmacy network, negotiating with manufacturers for the best prices on drugs, and trying to keep consumers compliant with their drugs. But there have been distinguishing factors, such as SXC's technology prowess, that set the players apart from one another.

With every public-sector group and private business scraping for all the savings they can get, we can expect an active PBM procurement season and more contract changes. In an industry led by the Big 2 rather than the Big 3, the-everybody-else category also just got smaller

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