Walgreens doesn't need PBM to keep it at top
WHAT IT MEANS AND WHY IT'S IMPORTANT — A lot was made of Walgreens' sale of its pharmacy benefit management business to focus on its stores and the other parts of its business, with some analysts and pundits suggesting CVS should or might soon follow suit. Whether or not CVS Caremark decides to do the same remains to be seen, but it certainly isn't the foregone conclusion some have suggested it might be.
(THE NEWS: Walgreens says farewell to PBM business. For the full story, click here)
Ever since CVS purchased Caremark, Drug Store News has maintained that these are two companies — CVS Caremark and Walgreens — that are more or less trying to skin the same cat two different ways. CVS believes it can use a big PBM to win business from big payers; Walgreens believes it doesn't need a PBM to do that, and has had some success negotiating directly with big payers, including the pharmacy deal it signed with Caterpillar in 2010 and the scores of employers that have engaged its Take Care work-based health solution.
That part really hasn't changed. Who has built the better mousetrap? These companies are the Nos. 1 and 2 in our industry, and there is no sign of that changing any time soon.
You can't necessarily draw a lot of conclusions about what CVS will do or should do with Caremark based on Walgreens' decision to sell its PBM. It's just not an apples-to-apples comparison; in fact, it's more like apples-to-grapes. With the recent deal, Catalyst Health only will become the fifth-largest PBM in the country, and the drop-off between No. 4 and 5 is precipitous, to say the least. Mail order was just 2.5% of Walgreens Health Initiatives’ business. It just wasn’t a big business for Walgreens, and on that level maybe you could say that its PBM was a distraction. The PBM is clearly worth a lot more to CVS.
Does that mean CVS stays in the PBM business forever? Not necessarily — just don’t look for a lot of omens as to what CVS will or won’t do based on what Walgreens has done or plans to do. In fact, the company has carved out a reputation for “zigging” when Walgreens “zags.”