In the PBM world, the glare of the planned Medco-Express Scripts merger can be blinding. Beyond it, there are developments worth watching. Several smaller operators are making crafty partnerships to build market share.
Navitus, the PBM owned by Wisconsin's Dean Health System, splashed into an unexpected state: Texas. When Texas, Medicaid program ended its long-running pharmacy carve-out in March, the move opened the door to new pharmacy benefit managers in the state who serve health plans. The obvious winner is CVS Caremark, which manages pharmacy benefits for insurers like Molina Healthcare and Aetna. Much less obvious was Navitus, which landed contracts with 10 hospital-based regional Medicaid MCOs.
Signing up a handful of regional plans might not seem huge, but the adage about everything being bigger in Texas also applies to Medicaid. Texas Children's Health Plan had more than 300,000 members as of July 2011, followed by Parkland Community Health with 189,009, Community Health Choice with 174,427 and Community First Health Plans with 115,179. Those plans cover more than 1 million pharmacy lives, and the numbers don't include managed Medicaid expansions in September 2011 and March 2012, which should drastically increase enrollment for plans like FirstCare and Driscoll Children's Health Plan.
With conditions favorable to drug carve-ins and most states considering them, the Texas expansion leaves Navitus in a good position should other states with similar Medicaid MCOs turn drug benefit management over to them.
In another development, a year after its blockbuster purchase of Walgreen's PBM operations, Catalyst Rx inked a five-year deal to manage pharmacy benefits for Regence Rx. Compared to the $525 million Walgreens purchase, the Regence deal amounted to pocket change, but will significantly increase Catalyst's reach.
The Regence/Catalyst partnership resembles other long-term insurer-PBM partnerships, such as Aetna's deal with CVS Caremark. Catalyst will only manage pharmacy benefits and not buy the PBM. Catalyst will control pharmacy operations, customer service and technology, while retaining Regence Rx staff. Regence Rx will continue its clinical and contracting support for customers.
With a national PBM presence, Regence manages some 1.2 million pharmacy lives for Regence members in Oregon, Idaho, Utah and western Washington and provides some PBM services for about 3 million others. Catalyst has other Blue plan experience - it contracts with Wellmark, the Blue plan and dominant insurer in Iowa and South Dakota. Catalyst's Blue partnerships could turn Catalyst into an alternative to Prime Therapeutics, the PBM owned by nine profit Blue organizations.
Without the might of Express Scripts or CVS Caremark, smaller PBMs must be nimble to grow market share. Crafty contracting choices will help these operators thrive. Navitus and Catalyst Rx are staking down claims signaling they won't be going anywhere in this age of mega-mergers.