The anti-competitive nature of mergers

The FTC describes the market as competitively healthy. We would counter that three PBMs dominating 85 percent of their market tier is hardly diverse competition. Furthermore, the absence of strong competing forces allows PBMs to pocket rebates, lacking the incentive to cut costs for consumers by passing along those savings. In fact, rebates have tripled to over $170 billion between 2012 and 2018, with increasingly smaller portions of rebates being passed on to patients. ESI and CVS have acquired or driven out rival specialty pharmacies, expelling them from their networks, and targeting their consumers. ​

About the PBM Problem

Problems in
the Market

How PBMs Affect Cost

Our Goals  

The PBM market is highly concentrated. The recent merger of Express-Scripts and Medco resulted in an industry that is dominated by two major companies: ESI-Medco and CVS Caremark

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  • The massive control possessed by ESI-Medco and CVS Caremark enables them to act anti-competitively. Many of the smaller PBMs don't have the economies of scale that the "Big Two" have and can't reach as broad of a consumer base, putting them at a disadvantage. 
  • Furthermore, ESI-Medco and CVS Caremark's market share gives them enormous bargaining power. Many companies simply aren't large enough to leverage change from the major companies.
  • This consolidated market has allowed ESI-Medco and CVS Caremark to grow their profits tremendously, without benefiting consumers. Profits in the PBM industry have skyrocketed in recent years, a phenomenon that is likely due to deception and unrealized savings for payors. 

Push Back

The American Medical Association, opposing the mergers, submitted a letter to the Assistant Attorney General pointing out the anti-competitive nature of the CVS/Aetna merger. While the proposed merger is vertical, acquiring a different entity along the supply chain, horizontal competition stands to be the heavily affected as well. These comments come a few months after the Department of Insurance hearing in California, lead by Commissioner David Jones, where academic experts outlined the harms that PBM/insurer giants pose as a combined force. Proponents of the merger argue the acquisition would bring about efficiency savings that would be passed on to consumers. However, a 2015 UnitedHealthcare acquisition of CatamaranRx, into its OptumRx PBM has shown no evidence of consumer benefits. Before that, in 2011, Express Scripts and Medco merged, leaving consumers with higher prices and less choice. 

The current administration has been vocal about the potential passage of regulation to require the passing of rebates to Medicare beneficiaries as well as the elimination of anti-kickback safe harbors for rebates. Members of the Senate have also taken to the floor to decry the practices of PBMs and untangle the knots around increasing drug prices. These actions are welcome reinforcements to a wave of state-level legislation, Department of Insurance hearing, and litigation (over 20 antitrust or fraud cases have been filed over the last two years).

Our Articles 
Why DOJ must block the Cigna-Express Scripts merger, The Hill, March 27, 2018
 CVS-Aetna Merger Is a Robber Baron's Dream Come True, The Hill, December 6, 2017