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Pharmacy benefit managers are intensifying their courtship of self-funded employers in the wake of recent industry consolidation and other developments, including a decision by UnitedHealth Group Inc. to sever its ties with Medco Health Solutions Inc.
Once the nation's largest pharmacy benefit manager, Franklin Lakes, N.J.-based Medco lost a contract serving some 12 million members of Minnetonka, Minn.-based UnitedHealth the same day St. Louis-based Express Scripts Inc. announced its acquisition.
Now, UnitedHealth is providing PBM services internally via its OptumRx Inc. subsidiary, a rebranding of the former Prescription Solutions, a firm that UnitedHealth picked up when it acquired Cypress, Calif.-based PacifiCare Health Systems Inc. in 2005. OptumRx also is competing for self-funded employer business, sources said.
“OptumRx is capturing a lot of business,” said Susan Hayes, a principal at Pharmacy Outcomes Specialists L.L.C., a Lake Zurich, Ill.-based pharmacy benefit consulting firm. She said that UnitedHealth is taking a “write-off” on its PBM business to reduce its profit margin so it can better meet the new minimum medical-loss ratios for its insured business set under the Patient Protection and Accountable Care Act beginning this year.
UnitedHealth did not respond to a request for comment.
Meanwhile, Catamaran Corp., the nation's fourth-largest PBM based on prescription volume created by the merger of Lisle, Ill.-based SXC Health Solutions Corp. with Rockville, Md.-based Catalyst Health Solutions Inc., promises to be a “disruptive model” in the marketplace by offering better service and greater cost savings to self-funded employers, sources said.
“PBMs are definitely going after the self-funded business, but that's not new,” said William A. Schlag, a Boston-based senior vp in Willis Group Holdings P.L.C.'s human capital practice. “There's renewed energy because of consolidation. There's increased competition in the PBM world.”
“The PBM marketplace is a buyers' market for self-funded employers,” said Robert Kalman, a principal in Buck Consultants L.L.C.'s national pharmacy practice in Washington. “Over the past five years, there's been rapid consolidation in the PBM industry starting with CVS Inc. buying Caremark in 2007, the Express Scripts acquisitions, culminating with Medco last year to produce the largest PBM in the country with over 100 million lives.
“With the consolidation, there has been intense competition among PBMs for self-funded employer business. To get that business, they either have to buy other PBMs or take away business in competitive bidding situations. This puts the employer in an enviable position to achieve very, very aggressive pricing and other terms,” Mr. Kalman said.
States seeking to deter the abuse and diversion of controlled narcotic prescription pain medications should look to New York state's efforts to implement a “real-time” drug-monitoring registry with teeth.