Pharmacy Benefit Managers are under pressure: The industry is a lightning rod for America’s healthcare system at its worst

By 2019, the Pharmacy Benefit Management market is forecast to grow to $283bn. Acting as the ‘middle men’ of America’s healthcare system, PBMs process and coordinate the delivery of prescription drugs, and act as intermediaries between payers and other value chain constituents. It is one of the least regulated sectors of the health care system, lacking transparency, choice, and ripe with conflicts of interest.

It is known that PBMs actively engage in conduct that harms the American consumer. Yet, there is increasing pressure on the industry both from healthcare buyers and politicians. A recent scandal surrounding the use of ‘gag clauses’ between PBMs and pharmacies has tapped into the deeply rooted American believe in the free market, and made PBMs the scapegoat of the ongoing political debate on high drug prices. The industry has consolidated, and is set to defend itself against pressure on all sides, including the entrance of a large corporate new entrant with an agenda to reduce the skyrocketing prices of drugs in America’s healthcare market.

Key Highlights

- Pharmacy Benefit Management is a lucrative $283bn industry that has outgrown its value.

- Pharmacy Benefit Management exploits informational asymmetries at the heart of a complex healthcare system, lowering the quality and increasing the cost of American healthcare.

- Pharmacy Benefit Management Industry is set to be shaken-up by the entry of an Amazon/JP Morgan/Berkshire Hathaway joint venture. This will change the structure of the industry.

Scope

- Examines the Pharmaceutical Benefit Management Industry

- Evaluates future of Pharmaceutical Benefit Managers within America's healthcare

- Assesses reasons behind the ballooning cost of America's healthcare

- Looks at consolidation within the Pharmacy Benefit Management Industry.

Reasons to buy

- What is the future of American Healthcare?

- What is at the heart of healthcare inefficiency in the USA?

- How will the PBM industry evolve?

- How do PBMs make money?

- How will PBM consolidation affect patient healthcare?

Companies mentioned

Table of Contents

Table of Contents

Overview

Catalyst

Summary

PBMs: the tapeworm in American Healthcare

Lucrative $283bn Pharmacy Benefit Management industry is hot topic

50% of the United ...

Table of Contents

Overview

Catalyst

Summary

PBMs: the tapeworm in American Healthcare

Lucrative $283bn Pharmacy Benefit Management industry is hot topic

50% of the United States drug budget spent on specialty drugs

Historically, PBMs were a countervailing power

Expansion through the value chain towards the formulary

Today, PBMs benefit from rebates, payments, and informational asymmetry

Market opacity has led to rent-seeking by PBMs

Drug rebates retained

Algorithmic assistance

Cream skimming

Overpaying in confidence

Your auditor, my auditor

Attention is shifting to the ‘ballooning costs’ of healthcare

Amazon’s entry into the market intensifies consolidation

Conclusions

Appendix

Sources

Further Reading

Ask the analyst

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Disclaimer

List of Tables

List of Figures

List of Figures

Figure 1: PBM Market share by total equivalent prescription claims managed, 2017

Figure 2: Nominal and inflation-adjusted per capita spending on retail ...

List of Figures

Figure 1: PBM Market share by total equivalent prescription claims managed, 2017

Figure 2: Nominal and inflation-adjusted per capita spending on retail prescription drugs, 1960-2017

Figure 3: Express scripts drug trend by therapy class, 2006-2017

Figure 4: PBMs are at the center of a complex healthcare market

Figure 5: Generic prices have declined while branded drug prices tripled between 2008-2016

Figure 6: Payer-Aligned medical-pharmacy future

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