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Who are the top companies other than SmithRX that are offering PBM (pharmacy benefit mgmt) solutions to small to mid sized companies?
Hello! Thanks for asking Wonder about the top pharmacy benefit management (PBM) companies catering to the small and mid-sized business (SMB) market.
In short, I found very little mention of PBM companies that specialize in the SMB market. The top three companies hold about 75-80% of the overall market, according to several reports I found. Express Scripts is the largest stand-alone PBM and tops the list of those that serve SMBs, according to my research. Most SMBs appear to gravitate to stand-alone PBMs, which I have explained in detail below. A Wonder list typically comprises 7-10 items. After an exhaustive search, which required extensive research on the background of PBMs and their offerings to small to mid-sized companies, I have identified the top eight stand-alone PBMs that serve the SMB market segment, plus one company for which I could not find revenue data, the metric by which I ranked the list. Express Scripts, CitizensRx, Argus, MedImpact, Procare Rx, WellDyneRx, Navitus, Meridian Rx, and Phoenix PBM are the top companies providing pharmacy benefit management (PBM) solutions to small and mid-sized companies. Below, please find the results of my research, along with my methodology.
METHODOLOGY
I began my research by looking for any precompiled lists of PBMs that serve the small or mid-sized business (SMB) market. However, the only lists I found featured the top PBMs overall. I then looked for lists of competitors for SmithRX, hoping this approach would lead to a useful list, but that research path proved fruitless. So, then, I did some research into the types of PBMs that exist and where SMBs might fall into that picture. This strategy led me to information on the business models adopted by PBMs and where SMBs fit into that picture. This approach allowed me to piece together the companies that likely top the list of PBMs serving the SMB market.
OVERVIEW
First, I found a white paper by the Institute for Local Self-Reliance, which states that two PBMs, Express Scripts and CVS Health, control 75% of the market. Another report, HIRC's "Pharmacy Benefit Managers: Market Landscape and Strategic Imperatives," is paywalled, so I cannot access the full details of the report. However, the overview states that three companies hold 75% of the market. While it does not specifically call out these three companies, the overview suggests that they are likely Express Scripts, CVS Caremark, and Optum Rx. Another report suggests that the top three PBMs hold 80% of the market. There has been a lot of merger and acquisition activity in this market, so the PBM market is extremely concentrated, creating further limitations in creating the list you have requested. These statistics would suggest that the largest PBM companies likely dominant the SMB segment of the market as well.
CARVE-OUT VS CARVE-IN
The HIRC report also introduced me to the terms 'carve-out' and 'carve-in', which I've now learned are two of the top business models for the PBM sector. So I did a little more digging regarding these terms to see how they might relate to the SMB market segment. Carve-out, or stand-alone, PBMs make up 36% of the PBM offerings, while carve-in, or health plan-owned PBMs, make up another 36%. PBMs owned by retail pharmacies make up 27% of the market.
Actuarial company Milliman offers a good explanation of the carve-in and carve-out models. With the carve-in model, employers contract with health plans to handle their pharmacy benefits, and the health plan either manages those benefits in-house or contracts with a PBM vendor to manage their pharmacy program. The carve-in model is typically used by employers that are fully insured, which accounts for 23% of small employers and 7% of large employers. With the carve-out model, employers contract directly with their PBM vendor of choice, essentially carving out the health plan as the intermediary. The carve-out model is typically favored by employers that are self-insured, which accounts for 77% of small employers and 93% of large employers.
These statistics would suggest that the majority of SMBs likely use carve-out, or stand-alone, PBM providers. However, it appears the market may be putting pressure on stand-alone PBMs with more insurers bringing the service in-house.
TOP PBMS FOR SMALL AND MID-SIZED BUSINESSES
Based on the aforementioned statistics suggesting the dominance of a few companies in this market and the overwhelming use of stand-alone PBMs by SMBs, I've worked on compiling a list of the largest stand-alone PBMs. However, even this approach proved somewhat challenging, as Modern Healthcare notes that Express Scripts is "one of the only ones that functions as a stand-alone PBM." Many of the other PBMs are intermingled with health plan providers. One such list was found at RxResource, while another was found at The Balance. I have ranked them according to revenue. For private companies, which don't have to report their finances, I used Owler, Find the Company, or Hoovers to locate estimated revenues.
Express Scripts is the largest stand-alone PBM with an anticipated $102.190 billion in 2017 revenue. Express Scripts dominates every list I found, so it very likely dominates the SMB market segment as well. Express Scripts' dominance in the market may be threatened by litigation from one of its main health plan clients, Anthem, which has sued the PBM for not sharing enough of the drug savings
Citizens Rx, based in the Chicago area, is a full-service PMB serving both private and public companies. It offers "formulary management, claims processing, rebate administration, and a 67,000-location national pharmacy network." Also, Citizens Rx operates specialty pharmacy Praxis Rx. It has estimated revenues of $500 million.
Argus is one of the leading independent PBMs in the market. The company prides itself on its transparency and full disclosure business model. Argus is a privately-held company with estimated revenues of $65.531 million. As a PBM, Argus's Specialty Pharmacy Benefit program includes disease specialization, patient assessments and interventions, a customized pharmacy network, and Medicare/Medicaid support.
MedImpact is an independent PBM that manages contracts, retail/mail networks, specialty pharmacy, and cost control and quality outcomes, as well as providing claims processing services. It serves the commercial, Medicare/Medicaid, self-insured and employer groups, the 340B drug discount program, and state and local governments. MedImpact is a privately-held company with an estimated $20.3 million in revenue.
Founded in 1987 by the Burgess family, ProCare Rx is a PBM and healthcare IT company, which introduced its PBM services in 1998. They claim to have "pioneered transparency and a philosophy of 'lowest net cost.'" They serve employers of all sizes, as well as managed care organizations (MCOs), Medicaid plans, health exchange plans, insurers, hospices, and more. Its estimated revenues are $20 million, according to Owler.
A full-service PBM, WellDyneRX is in the process of being acquired by private equity firm Carlyle Group. The sale is expected to allow the company to expand to serving mid-size clients, suggesting that its current clientele is made up of small businesses. The acquisition will also create more competition for the company as it moves into a larger market. the company has estimated revenues of $20 million.
Navitus is a privately-held, independent PBM that boasts a "full disclosure, 100 percent pass-through model." The company's case studies indicate they serve a variety of clients, including employers of varying sizes. They work with individual client needs, allowing the client to determine their level of involvement with regard to managing the benefit plan. Navitus has estimated revenues of $15 million.
MeridianRx, based in Detroit, reached the milestone of one million beneficiaries served in July of 2016 after only six years in business. The company credits its growth to dedicated employees and its proprietary technology called MERLIN, a software solution that "provides complete network access, custom reporting tools, real-time claim access, secure web-based portals for both members, providers and administrators in addition to lower administrative fees and fast, reliable claims processing." The privately-held company has estimated revenues of $6.4 million and 97 employees.
Phoenix is a PBM that serves "340B, Hospice Care, and our RxAdvantage Prescription Card to self-funded employee groups, TPA's, hospitals and individuals." Revenue data was not available for this privately-held company.
SUMMARY
To sum up, the top companies providing PBM solutions to small and mid-sized companies are Express Scripts, CitizensRx, Argus, MedImpact, Procare Rx, WellDyneRx, Navitus, Meridian Rx, and Phoenix PBM.
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