Speaking of hurricanes, tis the season and here’s another more menacing to the pharmaceutical industry than MACRA, which I discussed last week. Unlike MACRA, this is bound to make a direct hit on the shores of pharmaceutical manufacturers’ profits: the super-alliance of Walgreens and Prime Therapeutics.
“The alliance between Walgreens and Prime introduces a new model that aligns pharmacy, PBM and health plans,” the late August Walgreens press release announcing the agreement said.
Owned by 14 Blue Cross and Blue Shield health plans, the pharmacy benefit manager (PBM) Prime negotiates prices with drug companies and structure formularies. It handles the pharmacy benefit, in other words, as well as medical in the case of specialty pharmacy needs.
Walgreens is the 2nd largest retail pharmacy and thus handles distribution. Both companies have their own specialty and mail-order pharmacies.
The new, yet-to-be-named entity will become the exclusive mail and specialty pharmacy for Prime’s beneficiaries, but it will also be able to contract with (and dispense for) other PBMs and plans. Meanwhile, health plan subscribers with pharmacy benefits managed by Prime Therapeutics would have preferred access to Walgreens’ pharmacies.
The press release goes on to say the alliance will “coordinate patient care, improve health outcomes and deliver cost of care opportunities.” While Walgreens has every reason to tout potential benefits of the alliance to the consumer, it is unclear why or how benefits will distribute beyond the primary stakeholders involved.
One possible positive outcome could be the improvement of pharmacy/medical benefit coordination, in which Prime claims to outpace the industry leader OptumRx.
“Prime told me that its medical/pharmacy management capabilities are equal to—or superior to—OptumRx’s capabilities. Given its ownership by Blues plans, this claim is credible but unproven” said Dr. Adam Fein on his widely read blog at drugchannels.net.
Integrating the retail pharmacy business with a PBM is nothing new: Walgreens’ main competitor is CVS, which already does that. The difference here is Prime’s structure, being that it is owned by major Blues plans, making the health plan a strategic, active partner rather than just another stakeholder. These three combined stakeholders – plan, PBM, and pharmacy – add up to a whole lot of clout at the bargaining table.
The impact this power shift will have on consumer pharmacy spend is up for debate, since their position isn’t changing and fewer stakeholders does not typically translate to lower prices for the consumer; competition does. In that sense the Prime/Walgreens alliance is more akin to a Game of Thrones narrative with the patients pretty much left out of the equation, at least for now. But with PBMs, plans, and retail pharmacies ascending, the one stakeholder group at risk of losing leverage in this scenario is pharmaceutical manufacturers. Manufacturers are bound to be pressured into agreements with these allied groups that they may not have been before.
How will CVS respond to its evolving competitive landscape? Will other PBMs start alliances with health plans and retail pharmacies to gain leverage contracting with pharmaceuticals?
The devil will be in the details, which will be disclosed over the next year, and industry experts will be keeping a close eye on what move other major players (eg. Express Scripts, OptumRX, and Humana Pharmacy Solutions) will make next. Spoiler, anyone?
Learn more at:
http://www.wsj.com/articles/walgreens-forms-alliance-with-prime-therapeutics-1472482884
http://www.startribune.com/prime-therapeutics-walgreens-to-form-pharmacy-alliance/391668561/
http://www.drugchannels.net/2016/09/why-walgreensprime-deal-could-transform.html
