Just four years after exiting the pharmacy benefit management business, Walgreens is getting back into it with the acquisition of pharmacy retail chain Rite-Aid.
The $17.2-billion transaction, expected to close in the second half of 2016, will see Walgreens Boots Alliance acquire Rite-Aid Corporation, which owns the PBM Envision.
“Walgreens has come full circle and entered back in to the pharmacy benefit management space,” says A.J. Loiacono, chief innovation officer and co-founder of Truveris, a provider of prescription drug software and analytics. Walgreens sold its PBM business in 2011 to Catalyst, which was subsequently purchased by Catamaran, which was eventually bought by Optum.
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Envision is a pass-through PBM, says Loiacono, meaning it doesn’t engage in spread pricing, a practice whereby the PBM pockets the difference what it bills the health plan and what it pays the pharmacy. Instead, pass-through PBMs charge an administrative fee on a per employee per month basis. “It’s transparent in that whatever is charged at the register is what the plan is charged,” he says.
The PBM industry has become “hyper-competitive at the employer level,” says Loiacono. “I think a lot of this consolidation might be offensive, some of it might be defensive – that if I want to compete in this market, I need more scale.”
One of Walgreens’ competitors, CVS, announced plans in June to
CVS and Walgreens “are kind of mimicking each other. They’re shadow-stepping,” says Loiacono. “They’re both expanding their networks.”
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Nevertheless, “any consolidation by major vendors strengthens market presence, reduces competition and enhances the likelihood that costs will rise,” believes Brian Klepper, principal with Health Value Direct, a consulting firm. “This is true with the proposed health plan mergers and almost certainly true with Walgreens-Rite Aid as well.”
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