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.
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 purchase Target Corp.’s pharmacies and clinics. CVS also has a PBM business, CVS Caremark.
CVS and Walgreens “are kind of mimicking each other. They’re shadow-stepping,” says Loiacono. “They’re both expanding their networks.”
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.”
Also see: “Employers divided on Aetna, Humana merger
Register or login for access to this item and much more
All Employee Benefit News becomes archived within a week of it being published
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access