To complement that broader ranking, we present below our exclusive list of the top 15 pharmacies based on specialty drug dispensing revenues. You will see that PBMs and insurers have increased their dominance over specialty drug channels. Many of the largest independent companies have been acquired.
As we look ahead, CVS Health and Cigna’s Express Scripts seem best positioned for further growth. However, AllianceRx Walgreens Prime—the joint venture between Walgreens Boots Alliance and Prime Therapeutics—faces significant market share loss.
Read on for all the details.
DCI’s TOP 15
Drug Channels Institute (DCI) estimates that in 2020, retail, mail, long-term care, and specialty pharmacies dispensed about $176 billion in specialty pharmaceuticals prescriptions. That’s an increase of 9.1% from the 2019 figure.
The exhibit below—one of 211 in our new 2021 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers—ranks the largest pharmacies based on revenues from the dispensing of specialty pharmaceuticals.
[Click to Enlarge]
Here are three key insights from the market share data shown above:
- PBMs and insurers are increasing their dominance over specialty dispensing channels. For 2020, the top four specialty pharmacies accounted for 75% of total prescription revenues from pharmacy-dispensed specialty drugs. All of these pharmacies are fully or partially owned by one of the largest PBMs—which are themselves part of large vertically-integrated organizations. See The Top Pharmacy Benefit Managers of 2020: Vertical Integration Drives Consolidation.
The concentration of specialty dispensing revenues shown above results largely from the strategies that payers use to narrow specialty drug channels. PBMs and health plans typically require patients to use the specialty pharmacy that the plan or PBM owns and operates. This tactic reflect pharmacy benefit management’s focus on the more expensive specialty drugs that treat smaller patient populations. Specialty drugs account for a growing share of payers’ pharmacy benefit spending. For more on payers’ network strategies, see Chapter 7 of our 2021 pharmacy/PBM report. What’s more, manufacturers often limit and manage the specialty pharmacies eligible to dispense these expensive medications, further concentrating share.
These developments have also triggered changes in PBM compensation. We estimate that for 2020, PBMs earned more than one-third of their gross profits from specialty dispensing activities.
- Specialty pharmacies have faced an industry shakeout. Revenues in the exhibit’s “All other retail, mail, long-term care, and specialty pharmacies” category come from the diverse set of pharmacies competing to dispense specialty therapies.
In recent years, fewer new specialty pharmacies have started up, and many of the largest independent companies have been acquired. During the time since we published our 2019 list of the top specialty pharmacies, three companies have been acquired and no longer appear among the largest specialty pharmacies: Diplomat Pharmacy, PANTHERx Rare, and BioPlus Specialty Pharmacy. All three were acquired by other companies that appear on our 2020 list, including two new companies that did not appear on last year's list: Acaria Health and CarePathRx.
For more, see Chapter 3 of our pharmacy/PBM report, which provides a comprehensive analysis of the specialty pharmacy market, as well as detailed profiles of the largest specialty pharmacies shown above.
- Walgreens will lose significant specialty share in 2021 and 2022. AllianceRx Walgreens Prime is a joint venture of Walgreens Boots Alliance (WBA) and Prime Therapeutics. We project that over the next two years, much of its specialty pharmacy business will be shifting to other PBM-owned specialty pharmacies:
- Express Scripts. Since January 2021, Prime’s Blue Cross and Blue Shield plans have had the option of using Express Scripts’ pharmacies or of staying with the AllianceRx Walgreens Prime pharmacy. Some plans have already begun to shift. For example, BlueCross Blue Shield of North Carolina has recently moved all self-funded group members to Express Scripts.
- CVS Health. In 2018, Prime was selected over CVS Health to manage the specialty pharmacy benefit for the Federal Employee Program (FEP), which includes 5.4 million federal employees, retirees, and their families. We estimate that this contract generated specialty revenues of approximately $3.5 billion for AllianceRx Walgreens Prime in 2020. However, this specialty business will move back to CVS in January 2022.
In addition to the loss of specialty volume, Walgreens also faces enormous risks related to its aggressive participation in the 340B contract pharmacy market. Last October, I predicted:
“As volume leaks away from AllianceRx Walgreen Prime, it will lose scale from an already-weakened business. A rush for the exits could then precipitate a wind down of the Walgreens-Prime partnership before 2026.”Notably, WBA has said almost nothing publicly about AllianceRx Walgreens Prime or 340B. Hmm.
NOTES FOR NERDS
- Most companies do not report prescription revenues from specialty drugs. DCI has therefore used various methods and primary sources to estimate the data.
- As noted in the exhibit’s footnotes, DCI has made various adjustments to account for the pro forma impact of mergers and acquisitions as well as certain client transitions among the largest PBMs. Pro forma revenues are computed based on the year in which an acquisition was completed. Year-over-year growth rates were also computed based on the prior year’s pro forma revenues.
- The market size figure excludes estimated revenues from provider-administered specialty drugs billed under a patient’s medical benefit.
- Note that specialty drugs’ share of plan sponsors’ pharmacy benefit costs is higher than their share of prescription revenues, because rebates do not impact prescription dispensing revenues.
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