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August 3, 2020
There’s a lot of talk about vertical consolidation of healthcare plans with pharmacy benefit managers (PBMs). Think Aetna/CVS or Cigna/Express Scripts. But have you considered what this means for the 10 largest pharmacy providers?
About what, exactly are people talking? The fact most of the largest healthcare insurance companies – including Aetna, Cigna, and United Healthcare — all have some type of pharmacy and PBM now under their direct control.
What’s interesting to me is flipping the tables and looking at pharmacies. Which of the top 10 pharmacies in the US (based upon 2019 approximate revenue) have or own a PBM? It’s time for an update:
The chart shows six of the top 10 largest pharmacies in the US control one or more PBMs.
Furthermore, the four without a PBM are either strategically aligned with a PBM, attempted to merge with another pharmacy who owns a PBM, or were bought out by a company with its own PBM.
Another thing I find fascinating is which part of the business is controlling? CVS merge with Aetna, and CVS controls. Cigna merged with Express Scripts, and Cigna controls. Many outsiders – and some insiders – are wondering what this control will mean for plan sponsors as they navigate renewals and other benefit decisions.
I wonder what it means in the context of monopolies and anti-trust questions. Congress is actively involved in antitrust matters in the tech sector. Four of the biggest tech companies in the country will testify on Capitol Hill in late July. That leaves me scratching my head to why the federal government isn’t looking at antitrust issues that may exist in healthcare, considering the size of the US healthcare market, it’s impact on GDP, and the accelerating rate of vertical consolidation across these critical healthcare markets.
Retail is a measly 5.5 percent of GDP and manufacturing is 11 percent. The prescription industry in the US alone in 2019 was over $446 billion, and now healthcare overall controls 18 percent of our GDP in 2020. Considering employers pay the largest share of healthcare through commercial plans in the US and already suffer from a lack of transparency in a complex system, we are on an unsustainable path.
Is consolidation of pharmacies, health insurers and PBMs a good thing? It raises significant concerns for me. After these consolidations, it feels like a bear and a fox are now watching the hen house.