Walmart has been busy. Pillpack is getting acquired or so is the news today.
According to the NIH, Medication nonadherence rates range from 25% to 50%. Nearly half of all adults have at least one chronic disease and the percentage of Americans taking at least one prescription drug increased from 38% in the period 1988–1994 to 49% in the period 2007–2010; during the same time the number of adults taking three or more prescription drugs doubled.
It is reported that Walmart may pay up to $1B for the pharmacy mail order logistics startup making it easier for patients to receive the right dosage at the right time in the comfort of their home. As industry consolidation continue, other companies in the medication management space to watch out for are Alto and Capsule.
According to a WSJ article, the two companies are in talks on a merger.
What a lot of people don’t realize is that both companies already have a relationship.
According to the NY Times, since 2010, they have sold a co-branded prescription drug benefit (PDP) for Medicare recipients, which offers savings on certain drugs bought at Walmart’s pharmacies. The two companies are now discussing how to expand that partnership in ways that would help drive more traffic to Walmart’s 4,700 United States stores, while increasing Humana’s enrollment.
And this strategy makes sense. Consider that Walmart’s demographic skews towards baby boomers and seniors. According to the graphic below, almost 50% of a shopper survey done by Kantar Retail Shopper Scape fit either in the Baby Boomer segment or Senior segment. ALDI in the graph happens to be a Walmart brand as well!
That aligns strongly with Humana’s cash cow – Medicare Advantage – as the ranks of baby boomers swell.
To drive enrolment, Humana needs that traffic and continuous enrolment in Medicare Advantage.
According to Modern Healthcare, Humana divested Concentra Clinics – a nationwide urgent care clinic that it previously acquired. At the time of the divesture in 2015, the CEO was quoted “Though Concentra’s operations did not ultimately align with Humana’s strategy as well as we had originally anticipated, we believe Humana and Concentra have gained valuable insights into consumer behavior over the past several years that will serve us both well moving forward,”
Due to demographics, a Walmart partnership may be better than running scores of urgent care clinics AND driving traffic (Medicare Advantage or PDP plan) to them. Evidence may indicate that urgent care clinics skew towards an urban younger population which runs counter to Medicare/PDP Plans and Walmart’s segment population.
Grocery chain operator Albertsons has just received the go-ahead from the government to acquire Rite Aid. That deal will combine approximately 2500 Rite Aid stores with Albertson’s 2200 grocery stores which include brands such as Safeways and Jewel Osco.
Of the key offering in the Rite Aid acquisition is – EnvisionRx, a national fully integrated retail, mail-order and specialty pharmacy benefits management (PBM) company.
EnvisionRx, apparently provides full disclosure in the PBM marketplace, promoting a transparent, pass-through business model in which 100% of earned rebates, discounts, and incentives are instantly credited at the point of sale to customers.
Rite Aid only acquired that PBM back in 2015. The consolidation continues the vertical integration in health care where distribution channels (stores) combine with the middle men (benefits administrator) to accelerate sales.
According to a March 2018 press release, 1932 stores and three distribution centers have now been transferred to Walgreens Boot Alliance for an estimated $4B.
However, that doesn’t account for all of Rite Aid’s approximately 4500 drug stores. Due to a government antitrust Walgreens/Rite Aid merger block, the remaining stores and PBM will instead go to recent acquirer – grocery store chain – Albertsons.
According to the FT, GSK bought out Novartis 36.5% stake in their consumer health joint venture partnership for $13B. That move brings to GSK – sole ownership of products such as OTC tooth paste Sensodyne while enabling GSK to strengthen its consumer health division within its three main revenue drivers.
GSK’s consumer health division make up approximately 25% of sales while the Pharma drug discovery arm make up 50% of sales. The other 25% of sales comes from vaccines.
The company was originally set to acquire Pfizer’s Consumer Health arm for a similar price in a diversification strategy that would have given it the OTC brand – Advil.
We have all heard the news by now of the Aetna and CVS Health $69B merger. What remains to be seen is the disruptive element. It’s business as usual. Or perhaps – economy of scale?
There was already a tie up as far back as 8 years ago. According to a 2010 WSJ article, Aetna contracted out long-term administration of its pharmacy-benefit business to CVS Caremark Corp in a 12-year agreement that offered prescription-drug discounts to some 10 million members.
As part of the arrangement for that deal, Aetna transferred 800 of its own PBM employees to CVS Caremark and retained 1,000 PBM employees. For such a tightly integrated deal, and the present day opportunity in drug costs, it was only a matter of time that the two companies merged.
Other opportunities in the merger is the ability for narrow networks in the benefit design. CVS minute clinics offering expanded/concierge options to Aetna self insured customers (large employers).
It is no longer a secret that these two firms are merging. Considering that their main competitors already have pharmacy benefit managers (PBM)- United – Optum Rx, Humana (it’s own PBM), and Aetna (CVS Caremark), it makes sense.
According to Fierce Pharma, the industry continue to speculate about Amazon’s intentions in the drug business. Besides its recent partnership with J.P. Morgan and Berkshire Hathaway to explore care plans with their employee population, what is clear is that creating a more efficient medicines supply chain is in its sights.