When US-based health insurer Cigna announced plans to acquire pharmacy-benefits manager Express Scripts, it expressed a strong belief that the deal will “drive greater affordability” through an expanded portfolio of health services and a closer connection between individuals and their health care providers.
But critics disagreed, pointing out how it extends a years-long trend of consolidation among insurers and pharmacy-benefit managers (PBMs).
“It doesn’t seem to me that combining these two businesses lowers their health costs and, therefore, makes their premiums cheaper,” Jeff Goldsmith, an adviser with the health care segment at consulting firm Navigant, told MarketWatch. “Plus you’ve got all the challenges associated with managing a larger business to sort through as well.”
MarketWatch reported that there are dozens of PBMs, including independent ones that work to keep drug prices consistent and limit overpricing by drug manufacturers. But Cigna’s announcement means that the three largest independent ones — Express Scripts, CVS Caremark and Optum Rx — will soon all be owned by insurance companies.” The largest PBM not owned by a single health insurer would then be Prime Therapeutics, which is owned by 14 Blue Cross and Blue Shield health plans,” the report said.
“The PBM industry was born because this is a terrible idea,” said Pramod John, CEO of specialty drug-management company Vivio Health. “We’re going backwards.”
Following Cigna’s announcement, the American Medical Association warned that the deal could exacerbate problems that it saw in the recently proposed merger between US pharmacy chain CVS and medical insurer Aetna. “The AMA will continue to strongly encourage rigorous review … to determine if … these deals will further restrict access and choice, raise prices and reduce quality care for patients, and avoid harm through further decline in competition,” said AMA President David O. Barbe.
Goldsmith noted that the continued consolidation in healthcare “has not lowered costs.” The PBM industry could also get less competitive as independent names see less competition and those acquired by insurers cater to a captive customer base.
“They’re just buying services from themselves, so the economic incentive to reduce pricing has just gone out the window,” John said. “These dynamics don’t incur any pressure on the manufacturing side to reduce cost.”
Competition in the pharmacy space could return, however, if the whispers of Amazon entering the drug-sales game were to materialize; in that case, consumers could decide to buy drugs out-of-pocket at lower cost compared to if they were to do so through a deductible in their insurance.
But according to Goldsmith, “it’s extremely unlikely that Amazon would enter into brokering large-scale drug purchasing” and compete directly with PBMs.