Rival PBMs plan to take advantage over last month of Express Scripts-Medco uncertainty

WHAT IT MEANS AND WHY IT'S IMPORTANT — The regulatory review of the Express Scripts-Medco merger now is in its final stages, and with the clock ticking down to that 30-day deadline, you can expect a full court-press from retail pharmacy interests looking to block the deal. The time for the three-point finesse shots from the corners of the court has passed, it's now time to charge the net and jam the message home; an Express Scripts-Medco merger is bad both for the retail pharmacy business and for consumers. However, it just might be good for CVS Caremark.

(THE NEWS: Report: FTC to rule on Express Scripts, Medco merger within 30 days. For the full story, click here.)

Not a finalized, approved merger, mind you. That wouldn't necessarily be any better for CVS Caremark's retail operations than it would be for any other pharmacy operator. But the uncertainty of the moment, just as both health plans and employers are starting to enter their request for proposal processes for the pending PBM selling season, it's that uncertainty that's good for CVS Caremark. "We are expecting to see more RFPs out in the marketplace this year," said Larry Merlo, CEO, president and director during an analyst call last week. "The benefit consultants are driving that with the Express-Medco deal on the horizon. So we do see more activity coming."

Incidentally, CVS Caremark is also benefiting from the Walgreens-Express Scripts failed contract negotiations. Though that benefit is showing up in transferred patients from Walgreens rather than any negotiating leverage for CVS' PBM operation. "I don't think the Express-Walgreens issue per se is particularly a significant factor," noted Per Lofberg, EVP and president of Caremark Pharmacy Services during the company's analyst call Feb. 8. "I do think that there will be an interest in comparing the cost savings and the benefits from restricted networks going forward, and that is probably, to some extent, prompted by the Express-Walgreens impasse, but that will be just one factor that we'll be interested in."

Lofberg suggested a rival PBM would need to produce savings in excess of 2% "for it to be a meaningful benefit to a customer and to justify the disruption that is inevitable when you change the network."