Tuesday, February 26, 2019

The Top 15 U.S. Pharmacies of 2018: M&A Reshapes the Market

Next week, Drug Channels Institute will release our 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers. It’s the tenth edition of our popular and comprehensive examination of the entire drug pricing, reimbursement, and dispensing system.

The exhibit below—one of 180 in our new report—provides a first look at the 15 largest pharmacies, ranked by total U.S. prescription dispensing revenues for calendar year 2018.

As you will see, vertical and horizontal mergers and acquisitions are reshaping the pharmacy and PBM industries—and enabling the big to get even bigger. I highlight some of the major transactions that affected our ranking.

For a sneak peek at the complete report, click here to download a free pre-publication draft overview (including the table of contents and a list of exhibits).

THE NEW ERA OF CONSOLIDATION

The table below shows the largest pharmacies ranked by total prescription dispensing revenues. The top seven dispensing pharmacies—CVS Health, Walgreens Boots Alliance, Cigna / Express Scripts, UnitedHealth Group (OptumRx), Walmart, Kroger, and Rite Aid—accounted for about 70% of U.S. prescription dispensing revenues in 2018. The top 15 pharmacies accounted for more than three-quarters of total dispensing revenues from retail, mail, long-term care, and specialty pharmacies.

[Click to Enlarge]

Note that four of the largest pharmacies are central-fill mail and specialty pharmacies operated by the PBMs Express Scripts, Caremark, UnitedHealth Group’s OptumRx, and Humana. This reflects the growing role of specialty drugs in the pharmacy industry. We estimate that specialty drugs account for 60% or more of revenues at these pharmacies. All four PBMs are now combined into companies that offer health insurance and operate specialty pharmacies.

A number of significant mergers and acquisitions affected the 2018 revenues and growth rates for the largest companies:
  • CVS Health made multiple acquisitions of smaller specialty pharmacies and retail chains. In late 2017, CVS Health also acquired Wellpartner, a provider of 340B contract pharmacy services that operated two small specialty pharmacies.

    In late 2018, CVS Health completed its previously announced acquisition of the health insurer Aetna. This transaction did not directly impact the market share figures above. CVS Health had been performing pharmacy order fulfillment for Aetna, so Aetna’s pharmacy revenues were already included with the CVS Health figures.
  • Walgreens made numerous acquisitions that increased its overall prescription dispensing revenues and number of locations, including 1,932 Rite Aid locations, 179 Fred’s Super Dollar pharmacies, and prescription files from DaVita’s non-dialysis-related pharmacy and 63 ShopKo supermarket locations.
  • In 2018, Cigna acquired Express Scripts. We therefore show a combined pro forma figure in the table above. The combined company would have been the third-largest dispensing pharmacy.
  • UnitedHealth Group’s OptumRx acquired Avella Specialty Pharmacy and Genoa Healthcare. The combined revenues of the acquired companies were more than $3.2 billion.
In our 2019 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers, we analyze these and other developments about pharmacy dispensing channels, pharmacy benefit managers, third-party payers, patients’ financial contributions, rebates, reimbursement, and much more. It will be released on March 5, but is available for preorder now.

NOTES FOR NERDS

There are at least three reasons our estimated prescription revenue data may not correspond with figures from other public sources:
  • We have computed or estimated the figures on a calendar-year basis. The fiscal years for many public retail companies do not correspond to the calendar year.
  • Many companies do not report prescription revenues. We have therefore used various methods and sources to estimate the data.
  • We have made various adjustments to account for the pro forma impact of mergers and acquisitions, as noted in the exhibit’s footnotes.

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