For 2023, nearly 80% of all equivalent prescription claims were processed by three companies: the Caremark business of CVS Health, the Express Scripts business of Cigna, and the Optum Rx business of UnitedHealth Group.
Read on for Drug Channels Institute’s (DCI’s) latest market share figures, along with a preview of the industry changes that will shift these shares over the next few years.
THE PAST AND THE PRESENT
DCI estimates that for 2023, about 80% of all equivalent prescription claims were processed by three companies: the Caremark business of CVS Health, the Express Scripts business of Cigna, and the Optum Rx business of UnitedHealth Group. This share was comparable to the large PBMs’ share in 2022. These data appear in Chapter 5 of our new 2024 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
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This concentration reflects the significant transactions and business relationships among the largest PBMs that have further concentrated market share. Five of the six largest PBMs are now owned by vertically integrated organizations that also own insurers, specialty pharmacies, and providers.
Exhibit 223 of DCI's 2024 PBM/pharmacy report updates our deconstruction of the major sources of the Big Three PBMs’ profits.
…AND THE FUTURE
There are a few notable marketplace changes that will shift the market share figures for 2024:
- In January 2024, Centene’s PBM business transitioned from CVS Health to Express Scripts, which began a five-year agreement to manage pharmacy benefits for about 20 million Centene beneficiaries.
We estimate that the Centene business will shift at least $35 billion in total gross pharmacy spend and more than 400 million prescriptions from CVS Caremark to Express Scripts.
- In February 2024, MedImpact Healthcare Systems, the largest privately held PBM, completed its purchase of Rite Aid’s struggling Elixir Solutions PBM business.
Rite Aid had purchased Elixir (then known as EnvisionRx) in 2015, but conspicuously failed to find any meaningful synergies as a micro-player in an increasingly challenging and consolidated market. (I illustrated Rite Aid’s troubles with one of my all-time favorite Drug Channels images.)
As I highlighted in last month's news roundup, CarelonRx has announced multiple investments and initiatives that will expand its internal dispensing capabilities and reduce its dependence on CVS Health. These activities include its acquisitions of BioPlus Specialty Pharmacy and Paragon Healthcare, the launch of CarelonRx Pharmacy, and its investments in the DomaniRx PBM claims administration platform currently in development. (See Section 5.2.2. of our new pharmacy/PBM report.)
Another wildcard: Prime Therapeutics and Capital Rx have announced a strategic alliance that will give Prime access to Capital Rx’s JUDI technology platform for enhanced pharmacy claims processing. This will be a full replacement for Prime's existing claims processing architecture (RxClaim). As I discuss below, Prime currently relies heavily on Express Scripts for pharmacy network management. It seems like this new alliance will not impact the Express Scripts claims figures above—at least for now.
THE POWER OF THREE
Controversy over PBMs’ roles and actions continues to grow—and not just from one notable billionaire.
Federal PBM legislation appears to have failed for now, but all 50 states have passed a total of more than 150 laws focused fully or partially on PBMs. That’s an average of more than three laws per state.
The Federal Trade Commission (FTC) is slowly chugging along with its inquiry into the PBM industry and its business practices. All five—which is more than three—FTC commissioners voted for this investigation.
Alas, the largest plan sponsor clients of the Big Three PBMs are still not publicly advocating for massive change in their PBM relationships.
So, for now, it seems that we’ll be stuck with the Big Three—no more, no less, you don't have to guess. When it's three, you can see, it’s a magic number.
IMPORTANT STUFF TO KNOW
There are several important considerations when reviewing the figures above:
- Rebate Aggregation. The figures above do not correspond to the number of covered lives handled via rebate negotiations.
Many smaller PBMs do not have the scale to negotiate favorable formulary rebates and may lack a claims processing system. In these situations, a larger PBM acts as an aggregator for these smaller entities. The bigger PBM gets to submit a larger consolidated rebate invoice, and the smaller player gets access to better pricing and a national claims system.
Rebate aggregation also occurs via the large PBMs’ purchasing groups, which handle rebate negotiations with manufacturers and provide other services to manufacturers and the groups’ members. To date, these groups are focused on commercial, nongovernmental business. The three major PBM-owned purchasing groups include Ascent Health Solutions (Cigna/Evernorth), Emisar Pharma Services (UnitedHealth Group/Optum), and Zinc Health Services (CVS Health).
Due to this aggregation, there is substantial double counting when evaluating covered lives. Summing up the figures reported by individual PBMs results in an aggregate number that greatly exceeds the total U.S. population.
- Claims and pharmacy network management. The figures for the largest companies include an unknown number of claims from smaller PBMs. That’s because many smaller PBMs outsource claims processing, pharmacy network management, and prescription fulfillment to one of the three largest PBMs.
For example, Express Scripts took over retail pharmacy network contracting for a portion of Prime Therapeutics’ business, beginning in 2020. Prime acquired Magellan Rx in 2022, so Express Scripts' network claims increased as this business was transitioned during 2023. Consequently, we estimate that for 2023, Express Scripts handled pharmacy network contracting for more than half of Prime’s overall network spend. Express Scripts reports the Prime/Magellan claims within its public financial reporting.
As I discuss above, CVS Health currently provides various claims and fulfillment services for Elevance Health’s CarelonRx business.
- Discount cards. Patient-paid prescriptions that use a discount card are not considered cash-pay, because the claims are adjudicated by a PBM. That's because discount cards are PBM-backed programs that pass some portion of rebates and network discounts directly to patients at the point of sale. Patients therefore avoid paying a retail pharmacy’s usual and customary (U&C) price for their prescriptions. A growing (but undisclosed) share of discount card claims are included within the figures for each PBM.
We reserve the term cash-pay prescription for claims that are not submitted and adjudicated, so a PBM or third-party payer has no record of drug utilization. Instead, the patient is the payer and there is no PBM involvement.
My fellow Gen X readers will appreciate this video analysis of today’s PBM marketplace. Click here if you can’t see the video.
Millennials should click here.
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