By Peter Johnson
Industry experts expect the COVID-19 pandemic and related economic crisis, in addition to the trend of vertical integration in the PBM sector, will increase those companies’ direct interaction with consumers.
The recent wave of payer acquisitions of PBMs has kept the latter on strong footing despite the crisis. CVS Health Corp.’s Caremark, UnitedHealth Group’s OptumRx and Cigna Corp.’s Express Scripts control approximately 74% of the market, according to a January 2020 estimate by Drug Channels Institute CEO Adam Fein, Ph.D.
Fein said in a May 8 webinar that he expects the dominant PBMs’ bargaining clout, deepening synergies and cash reserves to drive more aggressive formulary management during the COVID-19 crisis.
Vertical integration has changed the revenue mix of large PBMs. According to Fein, rebates account for a declining amount of profits for the big three PBMs, and they are largely passed through to payer clients.
The vertical integration trend has also helped PBMs adapt to new consumer choices driven by COVID-19, according to Fein. “Mail pharmacies [had] a huge spike [in fills] into March, and right now, mail pharmacy growth has now flatlined again. Retail pharmacy has taken a very big hit. Once the lockdown started to go into effect, [retail] prescriptions started to decline because people couldn’t get to the retail pharmacy,” Fein said.
Still, he is skeptical about the durability and scale of the consumer shift away from retail toward mail order.
“[Mail order] gained a little, but it’s not some runaway shift in the market,” Fein explained, citing its still-small share of the overall prescription drug market. “The notion of a retail-to-mail shift — it’s going to happen, but it may not last too much longer. So for PBMs, it’s a short-term boost, but perhaps not a long-term shift.”
However, Mike Schneider, a principal at Avalere Health, says that he’s bullish on the trend toward mail order. Schneider says consumers with chronic conditions and long-term medications are likely to stick with mail-order fills — assuming they are still available after the pandemic ends. The key to continuing that trend, he adds, is whether seniors, the largest demographic group of prescription drug users, take a liking to the mail order system.