Tuesday, March 13, 2018

The Top 15 Specialty Pharmacies of 2017: PBMs and Payers Still Dominate

Below is our exclusive Drug Channels Institute list of the 15 largest pharmacies, ranked by estimated 2017 revenues from dispensing specialty pharmaceuticals.

The battle for control of the specialty market accelerated in 2017, though pharmacies owned by pharmacy benefit managers (PBMs) continued to capture most of the market share. The top four specialty pharmacies are all owned or co-owned by a PBM. They accounted for about two-thirds of prescription revenues from pharmacy-dispensed specialty drugs.

Vertical integration M&A has been in the news. But as our data shows, the integration of PBMs and specialty pharmacies has already happened.

THE BIG 15

As I describe in The Top 15 U.S. Pharmacies of 2017, many of the largest pharmacies are now central-fill mail and specialty pharmacies operated by PBMs and insurers.

To complement that broader list, here is the Drug Channels Institute list of the top 15 pharmacies based on specialty drug dispensing revenues. The table appears in Chapter 3 of DCI’s new 2018 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. We discuss many of the individual companies in subsections of the report’s Section 3.3. Feel free to cite the DCI figures with appropriate attribution.

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Total prescription dispensing revenues from specialty drugs at retail, mail, long-term care, and specialty pharmacies reached $138 billion in 2017. Though pharmacy revenues from specialty drugs grew by nearly 9%, this growth rate was a historical low.

Here are some observations on the four largest pharmacies:
  • In 2017, CVS Health remained the largest dispenser of specialty drugs. Its specialty pharmacy dispensing revenues grew by 9%, to an estimated $35 billion. CVS Health’s 2018 revenues will suffer from the loss of the specialty pharmacy benefit for the Federal Employee Program (FEP), which will switch from CVS Health to Prime Therapeutics.
  • We estimate that in 2017, the revenues of Express Scripts’ specialty pharmacies were $27.5 billion. Note that Express Scripts does not publicly disclose any information about its specialty dispensing revenues. In 2017, overall prescription volume at Express Scripts’ specialty and mail pharmacies declined by about 3%. We estimate that specialty claims grew, while claims for traditional drugs declined.
  • In 2017, Walgreens Boots Alliance (WBA) and Prime Therapeutics completed the formation of AllianceRx Walgreens Prime. The new company combines the respective central-fill mail and specialty pharmacies of both organizations. Legally, the business is a subsidiary of WBA, so its financials are included within WBA’s broader financial reporting. This business is now the third largest dispenser of specialty drugs.

    Last month, Walgreens and Express Scripts announced the formation of ValoremRx Specialty Solutions, a new group purchasing organization focused on the procurement of specialty brand drugs. (Click here to read the press release.) The two companies accounted for one-third of the specialty market. Watch out!
  • BriovaRx specialty pharmacy is operated by OptumRx, the PBM owned by United Health. In 2017, OptumRx for the first time disclosed specialty revenues information about this business. The table shows the updated revenue figures, which are larger than the figures reported in the previous edition of our report.
We estimate that specialty drugs accounted for one-third of the pharmacy industry’s total prescription dispensing revenues in 2017. Note that specialty drugs’ share of plan sponsor pharmacy benefits costs is higher than their share of prescription revenues. That’s because traditional drugs have larger rebates than specialty drugs, though these rebates do not impact prescription dispensing revenues.

We project that by 2022, specialty drugs will account for a projected 47% of the pharmacy industry’s revenues. Will your company be ready?

NOTES FOR NERDS
  • Many companies do not report prescription revenues from specialty drugs. We have therefore used various methods and sources to estimate the data.
  • As noted in the exhibit’s footnotes, we have made various adjustments to account for the pro forma impact of mergers and acquisitions.
  • The market size figure excludes dispensing revenues from such healthcare providers as hospitals, health systems, and physician practices. It also excludes revenues from provider-administered specialty drugs billed under a patient’s medical benefit.
  • Note that total market size is higher than the figures reported in previous editions of our report. The restatement of the specialty market's size is due largely to a key industry data provider’s refined definition of specialty drugs. This has led to the reclassification of certain products and a larger specialty drug measured market. If you have access to our new pharmacy/PBM report, see the discussion on page 59 and in footnote 129.

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