- PBM Consolidation Ahead. We once again see the powerful consolidation trend in the PBM industry. Scale matters, especially in these last few years of major generic launches. There are more than 60 PBMs competing in the market—the top 3 process about 60% of total adjusted prescriptions.
- Streamlining = focus. Rather than forcing a false synergy, Walgreens is wisely focusing on its roster of non-retail dispensing and provider channels. Walgreens has a wide-ranging set of businesses within its Health Initiatives unit, but has struggled to assemble them into a coherent future vision.
- Bypass Strategy Redux? Divestiture frees Walgreens to more radically disrupt the traditional PBM business model with a cross-channel offering to employers, payers, and health plans. Reread Walgreen’s PBM Bypass Strategy for more speculations on this strategy.
Yes, I’m looking at you, CVS Caremark. See CVS Caremark: More Happy Talk, But Hard Work Remains.
Walgreens PBM also lacks scale, so the only real options were divestiture or a mega-acquisition. My estimates, which were cited in the Bloomberg article, suggest that Walgreens PBM will process about 108 million (adjusted) prescriptions in 2010. Although this means Walgreens is the ninth largest PBM, it also implies a market share of only 2.6% of total adjusted scripts.
The new catchphrase for Drug Channels participants? Get big, get focused, or get out.