IngenioRx: Anthem, CVS Health Join Forces

Two Giraffes symbolizing a CVS and IngenioRx / Anthem partnership in the U.S. healthcare industry jungle.
… A Tall Tandem In The Managed Care Ecosystem…

IngenioRx — Healthcare Business Climate Changer…

The recent announcement of a PBM partnership between Anthem and CVS Healthcare is a significant development. Anthem ( NYSE: ANTM ) is one of the largest managed care organizations in the United States. CVS Health ( NYSE: CVS ) is a coast-to-coast healthcare conglomerate comprised of retail / mail order / specialty pharmacy, home infusion, PBM and other clinical, commercial healthcare units. The combination of these two entities provides them with formidable competitive advantages. Scheduled to begin in 2020, their contract agreement is for 5 years.

…Anthem is the largest Blue Cross Blue Shield affiliate; it operates plans in 14 states…

…CVS Health is ranked number 7 in the Fortune 500…

While CVS has its own PBM (Caremark), IngenioRx will be a separate PBM entity with its own management team and pursue business in other states beyond the 14 in which Anthem is established. An important feature of the deal was Anthem would be able to maintain its own formulary and not adopt CVS Health / Caremark’s approved drug list.

Express Scripts Clears A New Trail…

Anthem’s present PBM is Express Scripts. Express Scripts and Anthem were not able to come to an agreement to extend their existing contract. Based on this falling out, Express Scripts recently acquired a medical benefits manager (EviCore Healthcare) for $3 billion to offset the loss of Anthem at the end of 2019 and to diversify their business model beyond pharmacy-centric healthcare industry sectors. There is also speculation Express Scripts may have done this to avoid being acquired by Walgreens Boots Alliance or perhaps Amazon — who is expected to launch large scale healthcare business initiatives, including pharmacy services, in the near future.

AllianceRx Walgreens Prime…

The IngenioRx partnership is similar to one already underway between Prime Therapeutics and Walgreens Boots Alliance (WBA) known as AllianceRx Walgreens Prime. It was introduced in 2016 and is a long-term strategic alliance comprised of a retail pharmacy network agreement and a combination of the companies’ central specialty pharmacy and mail service businesses. It is a collaboration of the nation’s fourth-largest PBM (owned by 18 Blue Cross Blue Shield health plans) and one of the nation’s largest drugstore / pharmacy services providers. AllianceRx Walgreens Prime also operates as its own business unit and they will be monitoring how IngenioRx measures up as a competitor.

United HealthCare / OptumRx And Catamaran…

MCO / PBM partnerships are not new but the scale of the partnerships is larger than ever; United HealthCare ( UHC ) went a step further in 2015 by acquiring what was then the 4th largest PBM in the nation, Catamaran, for $12.8 billion rather than merely partnering with them. Catamaran in many ways resembled Express Scripts including its penchant for driving growth through continually acquiring smaller PBMs and other specialized companies to fortify specific business units within it. UHC integrated Catamaran into its internal PBM unit OptumRx and continues to buy other specialized provider units like Surgical Care Affiliates for $2.3 billion early in 2017. IngenioRx is a significant competitor UHC / OptumRx (as well as other PBM and MCO entities) will account for in its present and ongoing business plans.

IngenioRx logo

A Managed Care Jungle…

IngenioRx, AllianceRx Walgreens Prime, UHC / OptumRx are sizable entities and their business environment is very competitive and complex. Express Scripts is still by far the largest independent PBM. It has great potential to position itself to engage a variety of customer segments with either one or both of its pharmacy and medical benefit management business units.

Aetna (which already has a 12-year PBM deal with CVS Health), Cigna (which already has a 10-year PBM deal with Catamaran that is now through OptumRx) and Humana (with its own PBM supported by DST Pharmacy Solutions) are undoubtedly assessing their competitive positions in light of the IngenioRx announcement.

…CVS will be optimizing its retail pharmacy opportunities based on the IngenioRx deal; it’s important to remember CVS operates the pharmacies in Target stores and quite possibly developing programs for Anthem members at its MinuteClinics…

Costco, Fred’s, Rite Aid, Walgreens and Walmart will be closely scrutinizing their existing positions and marketing strategies. Their adjusted forecasts will drive changes to remain competitive and grow business. Some health systems marketing their own medical / pharmacy plans will be impacted by the IngenioRx agreement. If Amazon is indeed moving forward with pharmacy-related programs, they will need to account for IngenioRx and other MCO / PBM tandems as well.

CVS Health logo

Strategic Exploration Continues…

For now, the Anthem / CVS Health duo will be busy maintaining, growing their existing businesses and making extensive preparations to migrate the Anthem business from Express Scripts. While Express Scripts will be involved with the transition of the Anthem business, it will be highly focused on aligning forces with its new medical benefits unit and growing revenue to overcome the loss of the Anthem income.

…According to the Wall Street Journal, CVS Health is seeking to acquire health insurer Aetna; a deal estimated to be valued at $66 billion dollars…

As healthcare industry business models continue to evolve; hybridization and mega partnerships are an ongoing trend. They have a pivotal influence on pharmaceutical and other healthcare product manufacturers with regards to market access, contracting, rebates and discounts. All have a great impact on consumers / patients, employer groups and of course; the medical provider community. Although it’s hard to imagine, even larger developments await beyond the IngenioRx deal.

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