Why PBMs Lead in Prescription Revenue Growth

PBM-owned and insurer-owned central-fill mail pharmacies make up 6 of the of the industry's largest 15 pharmacy companies, according to a new report.

The largest pharmacies, ranked by total prescription dispensing revenues from retail, mail, long-term care, and specialty pharmacies, are (in order): CVS Health, Walgreens Boots Alliance (WBA), Express Scripts, Walmart, Rite Aid, and OptumRx (UnitedHealth). The big six accounted for around 62% of U.S. prescription dispensing revenues in 2016, according to the “2017 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers” report from Drug Channels Institute. (Walgreens and Rite Aid have agreed to merge, but the merger has not taken place as yet.)

Retail pharmacies that focus on traditional drugs account for a majority of the industry’s dispensed prescriptions, but a decreasing share of the industry’s revenues, according to Adam Fein, PhD, President of Pembroke Consulting and CEO of Drug Channels Institute. Community pharmacies are dispensing an increasing share of 90-day prescriptions, a consequence of the generic plateau leading to the decline in mail pharmacy dispensing of maintenance medications, Fein told Drug Topics.

“These prescriptions have historically been dispensed by central-fill mail pharmacies, which were less expensive for third-party payers and consumers than were retail pharmacies. PBM-owned mail pharmacies’ economic advantage is eroding, however, as payers allow community pharmacies to fill 90-day prescriptions and establish narrow network models that increase 90-day-at-retail prescriptions,” Fein said.

However, thanks to increased dispensing of specialty medications, mail pharmacies have captured around 46% of the total industry’s prescription revenue growth. “For most recently-launched specialty drugs, manufacturers limit and manage the specialty pharmacies eligible to dispense these expensive medications. To manage costs and improve patient management, PBMs and health plans typically further limit the number of specialty pharmacies selected by the manufacturer,” Fein said. “These payer and PBM network strategies also have the consequence of shifting specialty dispensing into the largest payer-owned specialty pharmacies.” 

Meanwhile, CVS Health tops the list in terms of revenue, since it netted an estimated $61.1 billion in prescription revenue from retail pharmacy alone (a 14.8% share of the overall market), and a $35.3 billion prescription revenue from pharmacy services. With its $56.8 billion in estimated prescription revenue in 2016, Walgreens is second with a 13.8% share.

Express Scripts had $43.9 billion in estimated script revenue in 2016, followed by Walmart, with $20.6 billion; Rite Aid, with $19 billion; and UnitedHealth (Optum Rx), with $17.4 billion.

Rounding out the top 15 is The Kroger Company, with $10.8 billion in estimated 2016 script revenue; Albertson’s Companies, with $5.5 billion; Humana Pharmacy Solutions, with $5.1 billion; Prime Therapeutics, with $5 billion; Diplomat Pharmacy, with $4.6 billion; Cigna Corp., with $3 billion; Costco Wholesale Corp., with $2.6 billion; Ahold USA, with $2.2 billion; and PharMerica, with $2.1 billion.

The top 15 companies account for $294.9 billion of the industry’s overall $412 billion in estimated script revenue in 2016, according to the report.