The Top Pharmacy Benefit Managers of 2020: Vertical Integration Drives Consolidation

The drug channel is consolidating, both vertically and horizontally.

For evidence, look no further than Drug Channels Institute's estimates of pharmacy benefit manager (PBM) market share, which are shown in the chart below. For 2020, DCI estimates that the three biggest PBMs accounted for more than three-quarters of total equivalent prescription claims.

To help you make sense of recent market changes, I also include a brief video explaining how various transactions and partnerships have concentrated and shifted PBM share among the vertically integrated companies. The video is excerpted from my recent Patients, Payers, and PBMs webinar.

Depending on your role in the drug channel, you may or may not find these data terrifying.

LAND OF THE GIANTS

The market share chart shown below comes from our new 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

We estimate that for 2020, the big three PBMs—CVS Health (including Caremark and Aetna), the Express Scripts business of Cigna, and the OptumRx business of UnitedHealth Group—processed about 77% of all equivalent prescription claims. The top six PBMs handled more than 95% of total U.S. equivalent prescription claims.

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This concentration helps plan sponsors and payers, which can maximize their negotiating leverage by combining their prescription volumes within a small number of PBMs. The 2020 figures reflect the significant business relationships among the largest PBMs that have further concentrated market share.

The largest PBMs operate with different overall business strategies and structures. For our most recent company analyses, see Sections 5.2. of the new 2021 pharmacy/PBM report.

LET’S GET VERTICAL

Vertical integration has also transformed the PBM industry. Five of the six largest PBMs are part of large vertically integrated organizations that combine insurers, PBMs, specialty pharmacies, and healthcare providers. In the video below, I provide a brief overview of these organizations and discuss the PBM market share details. Click here if you can’t see the video.

P.S. You can find the first chart from the video—my infamous summary of the seven biggest vertically integrated organizations—in the Drug Channels March 2021 news roundup.