Three continues to be the magic quantity for pharmacy profit managers (PBMs).
For 2023, practically 80% of all equal prescription claims have been processed by three corporations: the Caremark enterprise of CVS Well being, the Categorical Scripts enterprise of Cigna, and the Optum Rx enterprise of UnitedHealth Group.
Learn on for Drug Channels Institute’s (DCI’s) newest market share figures, together with a preview of the business modifications that may shift these shares over the subsequent few years.
THE PAST AND THE PRESENT
DCI estimates that for 2023, about 80% of all equal prescription claims have been processed by three corporations: the Caremark enterprise of CVS Well being, the Categorical Scripts enterprise of Cigna, and the Optum Rx enterprise of UnitedHealth Group. This share was similar to the massive PBMs’ share in 2022. These information seem in Chapter 5 of our new 2024 Financial Report on U.S. Pharmacies and Pharmacy Profit Managers.
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This focus displays the numerous transactions and enterprise relationships among the many largest PBMs which have additional concentrated market share. 5 of the six largest PBMs at the moment are owned by vertically built-in organizations that additionally personal insurers, specialty pharmacies, and suppliers.
Exhibit 223 of DCI’s 2024 PBM/pharmacy report updates our deconstruction of the foremost sources of the Large Three PBMs’ earnings.
…AND THE FUTURE
There are just a few notable market modifications that may shift the market share figures for 2024:
Wanting past 2024, all indicators recommend that Elevance Well being is on the point of exchange CVS Well being with its personal inside sources. Since 2019, CVS Well being has offered such PBM administrative capabilities as claims processing and prescription achievement providers for CarelonRx. That’s why CVS Well being at the moment consists of CarelonRx’s prescription claims inside its monetary studies and in DCI’s PBM market share analyses. The CVS-CarelonRx settlement runs by 2025.
As I highlighted in final month’s information roundup, CarelonRx has introduced a number of investments and initiatives that may broaden its inside dishing out capabilities and scale back its dependence on CVS Well being. These actions embrace its acquisitions of BioPlus Specialty Pharmacy and Paragon Healthcare, the launch of CarelonRx Pharmacy, and its investments within the DomaniRx PBM claims administration platform at the moment in growth. (See Part 5.2.2. of our new pharmacy/PBM report.)
One other wildcard: Prime Therapeutics and Capital Rx have introduced a strategic alliance that may give Prime entry to Capital Rx’s JUDI expertise platform for enhanced pharmacy claims processing. This will likely be a full substitute for Prime’s present claims processing structure (RxClaim). As I talk about beneath, Prime at the moment depends closely on Categorical Scripts for pharmacy community administration. It looks like this new alliance is not going to affect the Categorical Scripts claims figures above—no less than for now.
THE POWER OF THREE
Controversy over PBMs’ roles and actions continues to develop—and not simply from one notable billionaire.
Federal PBM laws seems to have failed for now, however all 50 states have handed a complete of greater than 150 legal guidelines centered absolutely or partially on PBMs. That’s a mean of greater than three legal guidelines per state.
The Federal Commerce Fee (FTC) is slowly chugging together with its inquiry into the PBM business and its enterprise practices. All 5—which is greater than three—FTC commissioners voted for this investigation.
Alas, the most important plan sponsor purchasers of the Large Three PBMs are nonetheless not publicly advocating for enormous change of their PBM relationships.
So, for now, it appears that evidently we’ll be caught with the Large Three—no extra, no much less, you do not have to guess. When it is three, you may see, it’s a magic quantity.
IMPORTANT STUFF TO KNOW
There are a number of vital concerns when reviewing the figures above:
- Rebate Aggregation. The figures above do not correspond to the variety of coated lives dealt with by way of rebate negotiations.
Many smaller PBMs shouldn’t have the size to barter favorable formulary rebates and will lack a claims processing system. In these conditions, a bigger PBM acts as an aggregator for these smaller entities. The larger PBM will get to submit a bigger consolidated rebate bill, and the smaller participant will get entry to higher pricing and a nationwide claims system.
Rebate aggregation additionally happens by way of the massive PBMs’ buying teams, which deal with rebate negotiations with producers and supply different providers to producers and the teams’ members. To this point, these teams are centered on industrial, nongovernmental enterprise. The three main PBM-owned buying teams embrace Ascent Well being Options (Cigna/Evernorth), Emisar Pharma Companies (UnitedHealth Group/Optum), and Zinc Well being Companies (CVS Well being).
As a result of this aggregation, there may be substantial double counting when evaluating coated lives. Summing up the figures reported by particular person PBMs leads to an mixture quantity that drastically exceeds the whole U.S. inhabitants.
- Claims and pharmacy community administration. The figures for the most important corporations embrace an unknown variety of claims from smaller PBMs. That’s as a result of many smaller PBMs outsource claims processing, pharmacy community administration, and prescription achievement to one of many three largest PBMs.
For instance, Categorical Scripts took over retail pharmacy community contracting for a portion of Prime Therapeutics’ enterprise, starting in 2020. Prime acquired Magellan Rx in 2022, so Categorical Scripts’ community claims elevated as this enterprise was transitioned throughout 2023. Consequently, we estimate that for 2023, Categorical Scripts dealt with pharmacy community contracting for greater than half of Prime’s general community spend. Categorical Scripts studies the Prime/Magellan claims inside its public monetary reporting.
As I talk about above, CVS Well being at the moment offers varied claims and achievement providers for Elevance Well being’s CarelonRx enterprise.
- Low cost playing cards. Affected person-paid prescriptions that use a reduction card aren’t thought of cash-pay, as a result of the claims are adjudicated by a PBM. That is as a result of low cost playing cards are PBM-backed packages that cross some portion of rebates and community reductions on to sufferers on the level of sale. Sufferers due to this fact keep away from paying a retail pharmacy’s ordinary and customary (U&C) value for his or her prescriptions. A rising (however undisclosed) share of low cost card claims are included inside the figures for every PBM.
We reserve the time period cash-pay prescription for claims that aren’t submitted and adjudicated, so a PBM or third-party payer has no report of drug utilization. As a substitute, the affected person is the payer and there’s no PBM involvement.
HOME SCHOOLING
My fellow Gen X readers will admire this video evaluation of immediately’s PBM market. Click on right here if you happen to can’t see the video.
