| Mar 08 2018

Vertical Integration Continues with CIGNA/Express Scripts Announcement

Tracy Watts
Senior Partner, National Leader for U.S. Health Policy

Not long after the announcement that CVS Caremark would buy Aetna comes news of CIGNA’s deal to buy Express Scripts. Given that United Health Group already owns the OPTUM pharmacy benefit manager, the proposed CIGNA/ESI deal underscores that the market has swung “back to the future,” where medical and pharmacy benefits are managed by one entity.

This type of vertical integration makes business sense because of the opportunity to manage the total cost of care across medical and pharmacy. As discussed in this WSJ article, we’re seeing other examples of market integration as well. The proof of concept will be in the bottom line for the consumer and employer-sponsored plans. Historically, large employers have carved pharmacy benefits out of the medical plan and gone directly to a PBM for more favorable pricing and a greater share of rebates than the carriers were usually willing to share. The big question is whether the alliances between the medical plans and PBMs bring greater cost efficiencies, or whether they limit competition, choice and employers’ leverage in the market.

From a consumer perspective, the integration could be a good thing. Today, provider relationships are key to an insurance company’s success. When pharmacy is carved out of the medical plan, there is little insurance company oversight for medications prescribed and administered by physicians versus the PBM. In our analyses of specialty drug utilization, we often find opportunities to provide these drugs at a lower cost and in a site of care that might be better for the patient. A more integrated approach could benefit patients and have a favorable impact on cost. But it will be up to employers to ensure there is accountability and transparency. With that, we all win.

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