Mergers of healthcare giants have made big news. If you’re like most of us, you’re asking:
To explore the rationale for these consolidations, let’s start with a quick review of the prescription drug path between the manufacturer and the consumer (see Figure 1). The drug manufacturer sells to a wholesaler, who in turn distributes the product to hospitals, physician offices, and pharmacies. These healthcare providers administer or dispense the pharmaceutical product for cash or, in most cases, payments administered by a 3rd party private or public insurance program.
Both insurers and pharmacy benefits managers (PBMs) appear to the right of the chart along with other entities that manage payments between providers, employers, and consumers. These entities negotiate discounts and rebates with providers and drug manufacturers to lower their own program costs, enabling them to compete for healthcare business.
As consumers and employers, you may see the outcome of these negotiated discounts through higher or lower prescription drug costs. Your costs vary depending on which:
Insurers and PBMs also use prescription drug utilization to lower program costs. They use prior authorization programs to evaluate the clinical appropriateness of medications to treat your medical condition. These entities also use data analytics to measure medication adherence and gaps in care. When drugs are not taken as prescribed or gaps in care are evident, they initiate consumer education campaigns to offset future medical costs.
Finally, PBMs often serve as dispensing providers through ownership of mail order and specialty drug pharmacies. Specialty drugs are high cost drugs (often more than $1,000 per drug claim), which are typically used to treat rare, chronic conditions such as cancer. These drugs may require special handling such as refrigeration, and may require self-injection or administration by a healthcare provider.
The investment in resources needed by insurers and PBMs to negotiate discounts, maintain a network of providers, and offer clinical management programs is expensive. These consolidations will bring together under one roof the network of prescribing providers that typically contract with an insurer, such as Aetna or Cigna, with the PBM’s mail order pharmacy, specialty drug pharmacy, and their contracted network of retail pharmacies. Conceptually it’s conceivable that efficiencies could be obtained through better coordination of financial and clinical efforts to manage costs between prescribing providers, dispensing pharmacies, and the payers of healthcare. It is, however, heavily debated if financial efficiencies will benefit the consumer of healthcare services.
To illustrate some approaches that impact consumers, I point to very different programs.
The purchase of healthcare and prescription drugs continues to be a necessary yet complex and costly process. Stakeholders should scrutinize these consolidations to ensure that any financial efficiencies benefit the consumer. Don’t hesitate to voice concerns to regulators tasked with approving these acquisitions, if you believe costs would increase for payers and consumers due to a reduction in competition.