Express Scripts Next Move … Amazon?…Walmart? — John G. Baresky

With Anthem leaving in 2019 and a new year coming up fast, what can Express Scripts do for itself and investors?

…Express Scripts Has Numerous Options To Consider If Anthem Exits in 2019…

Anthem says, “Goodbye” To Express Scripts

A Formidable, Battle-Tested Organization Operating In Constant Change Mode; Express Scripts Is Conditioned To Grow As New Industry Trends Develop

…According to Fortune, Express Scripts is ranked at number 22 in the Fortune 500; it processes more than 1.5 billion claims every year…

Based in St. Louis, Express Scripts grew quickly over the years by targeting flagship accounts to accumulate large numbers of total covered lives and by acquiring other PBMs along the way; while Medco was by far their largest PBM buy, they established a track record before that of buying up lesser-scale competitors. It is well-conditioned to operating in an increasingly consolidating, regulated and competitive business environment. The loss of their largest client is the latest of a long series of challenges Express Scripts has taken on since it became one of the top five PBMs in the nation during the ’90s and eventually the largest independent PBM in the country.

Express Scripts Has Many Options

  • Predictably, it can go into a cost-savings mode as it sorts things out. More out-sourcing and reduced back-filling of openings as staff retire or move onto opportunities with other companies. These measures won’t begin to make up for the loss of Anthem but may free up funds for other initiatives. Cost-cutting measures can be immediate and long term corrosively detrimental to organizational effectiveness despite its reputation for contributing to profitability. They have to be done carefully so as not to disrupt current operations and customer service levels critical to Express Scripts’ ongoing success.
  • Adapt an extra assertive and refined business development / sales strategy to capture large scale employer and other accounts with hefty numbers of total covered lives over the next 15 months and an equally intensive client retention program. Express Scripts could target several “jumbo” employer plans as “must-wins” and be especially mindful of not losing any of its existing client base moving forward.
  • Explore alternative business models like contracting with large for-profit and not-for-profit healthcare systems, long term care facility operators and other healthcare providers to help them establish stronger regional / metropolitan or sector dominance. These would not fill the Anthem gap or have the immediate bang-for-the-buck large scale wins that large employer groups have but conceivably open pathways into other higher-margin service segments.
  • Historically, Express Scripts has grown in large part from acquisitions. It scaled up over the years through acquiring mail order pharmacies, specialty pharmacies as well as small to mid-sized PBMs until it made its largest deal to acquire a PBM larger than itself, Medco. There is the potential for Express Scripts to scale up further by acquiring one or more PBMs which will be substantially smaller than they are -likewise if they choose to buy a specialty pharmacy. A company (or companies) complementary to the PBM business like claims processing, benefits consulting or pharma / medical analytics may align well with their existing PBM business and allow them to expand beyond it. If the acquisition(s) are sizable, they may also shield Express Scripts with enough debt for it to avoid being acquired itself.
  • Optimize hub and specialty pharmacy opportunities with pharmaceutical manufacturers. This approach could help them redefine and fine-tune new streams of revenue with potentially higher margins while helping them diversify from conventional managed care organizations and large employer contracting strategies. The resources to initiate this are already in place; Express Scripts could amplify its marketing / sales strategy in this area to widen its position but they would not be enough to fully offset the loss of the Anthem revenue.
  • Amazon has been expanding its reach into healthcare. Express Scripts would offer a direct pathway for Amazon to quickly penetrate consumer / patient healthcare, managed care, employer and other payer sectors in full-scale fashion. While Amazon has been able to manage growth across the nation and account for various state-by-state commerce laws, tax policies, etc.; pharmacy and prescription drug dispensing / shipping laws are incredibly complex to navigate. By partnering with Express Scripts, Amazon would gain nationwide market access; Express Scripts would gain a new, unique customer that would put it at further odds with its contracted retail pharmacy networks. Amazon / Express Scripts could choose to engage the employer and managed care sector or develop programs centered on Amazon’s 65 million Prime members — and open market consumers both insured and uninsured. Either way, an Amazon / Express Scripts tandem is potentially an innovative new business model established competitors in retail and PBM circles would have to account for.
  • Walmart has been quietly fortifying its pharmacy unit’s leadership ranks. Over the last few years, they have added a number of pharmacy heavy hitters from Walgreens with proven experience in pharmaceutical / rebate contracting, retail pharmacy network contracting, mail order pharmacy, managed care and employer contracts. Express Scripts would add enormous PBM muscle to Walmart’s pharmacy business initiatives. Walmart claims 90% of the U.S. population lives within 10 miles of one of its 4,700 stores giving Express Scripts direct patient access which can be a substantial specialty pharmacy asset. A Walmart and Express Scripts partnership (or perhaps merger?) would compete against CVS Health retail (CVS stores and Target pharmacies) plus the PBM unit (which has a 10-year contract with Aetna) and against Walgreens and its collaboration with Prime Therapeutics. A buyout of Express Scripts by any retailer or an insurer / managed care organization would change its “independent” PBM status immediately; how it would stand under Amazon is debatable.
Express Scripts logo
Express Scripts logo

Looking Ahead, Anthem And Express Scripts Are Facing Pivotal Challenges To Drive Growth And Earnings Without The Benefit Of Working With Each Other

While the possible exodus of their largest client is a significant issue for Express Scripts to account for, in many ways it reflects their historic ongoing existence in the PBM sector. They are truly a battle-tested organization; if Anthem does indeed exit; it will test Express Scripts’ experience and fortitude. Conversely, it will very likely be a catalyst for them to develop new strategies and services to generates sales revenue while also providing the basis to modify their business model to stay ahead of the changes in the healthcare industry.

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About me

Hi, my name is John Baresky ( pronounced “ buh — ress — key “) and I have over 25 years of experience in healthcare.

Throughout my career, I have been writing about healthcare while developing and sharing important information with physicians, nurses, pharmacists and other clinicians plus consumers, patients, healthcare business professionals, investors and other stakeholders.​​

Healthcare is a vast industry. I organize its clinical, business, academic, technical and consumer topics into precise messages and stories that are easily understood and immediately useful. The content I write resonates across audiences with objective accuracy and clarity.

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John G. Baresky


John G. Baresky Healthcare Marketing Guy

Authentic, fact-based healthcare content marketing writing for medical, business, academic, patient and consumer audiences

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