The year 2015 was in its infancy when a PBM executive remarked to a Decision Resources Group colleague, ?You can expect more consolidation this year.?
Boy, was he right.
Even then it was clear that tectonic shifts were under way in the PBM industry, but at that time the shiny object everyone was watching was the astronomical cost of specialty drugs, especially Gilead's hepatitis C drugs Sovaldi and Harvoni.
So in February, Rite Aid's announcement that it would acquire the independent PBM EnvisionRx seemed to come out of nowhere, but it served as a warning to CVS Health. The second-largest PBM in the nation was no longer the only integrated PBM and retail drugstore chain in the industry.
As winter passed into spring, a voracious round of PBM and health plan M&A activity sent companies and clients whirling like a juggler spinning plates.
In March, OptumRx, the third-largest PBM in the country and a subsidiary of UnitedHealth Group, announced an agreement to acquire Catamaran, the fourth-largest PBM, also publicly traded. Since the announcement, executives with Cigna?Catamaran's top MCO client?have been cagey about whether the insurer would stay with Catamaran after the merger. The reason for the evasion became clear when Cigna and Anthem revealed that they were discussing a merger. Anthem has its own in-house PBM, Anthem Pharmacy Services, which is administered by Express Scripts.
Then in June, CVS Health signed an agreement to acquire Target's in-store pharmacies and walk-in clinics. When the deal closes, CVS/pharmacy will move past Walgreens to become the largest chain of retail drugstores in the United States.
Finally on July 3, 2015, after weeks of speculation, Aetna announced it would acquire Humana. Two years ago Aetna purchased Coventry, whose members still haven?t transferred to Aetna's PBM, CVS/caremark, which acts as third-party administrator for Aetna Pharmacy Services. The last Coventry lives are scheduled to move away from Express Scripts in 2017.
Humana also has its own PBM, Humana Pharmacy Services, administered by Argus. After the merger was announced, the two health plans mentioned in a conference call that they were considering creating their own in-house PBM. That could either take the contract business away from CVS/caremark or increase its role as administrator. In any case, Aetna's contract with CVS still has years to run.
The second half of 2015 may be just as active as the first, with smaller health plans eyeing combinations and looking to pick up a PBM at the same time from among the tempting targets below the scale of the top three.
Next on the PBM list by size of enrollment is Prime Therapeutics, owned by 13 independent Blue Cross and Blue Shield plans. The next three profiled by DRG?MedImpact, Navitus, and PerformRx?are all concentrated in Medicaid and other public-sector plans, where there has been yet another health plan merger announcement?Centene, which owns its own PBM, US Script, and Health Net of California (CVS/caremark).
CVS/caremark gained nearly 5 million Medicaid lives from January 2014 to January 2015, when it had 15.5 million members in that segment. When the OptumRx/Catamaran merger closes in the fourth quarter, the combined entity will move into second place in Medicaid enrollment, with 6.8 million. Express Scripts has very little Medicaid enrollment, 3.3 million, and could snap up one of these three to round out its menu of products and defend its flank.
Watch this space.
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