PBM Quarterly Reports

A review of the earnings reports and calls from the largest PBMs indicates that they all are growing and exceeding expectations.   Medco talked about health reform issues and its perception that the company’s services and approach are consistent with the need for  better management of chronic and complex diseases.  It observed that 96% of drug spending is for chronic diseases.  One of Medco’s strategic differentiators is the Therapeutic Resource Centers which deliver a drug-centered version of disease management.  The company also observed that consumers have been switching faster to generics and that there are some significant brand drug price increases.  In general, Medco said its customers are more interested in cost management tools.  Medco seems to have the highest rate of sales gain for 2009 and 2010.  (Medco Transcript) 

Express Scripts also had a good quarter and emphasized the value clients are seeing in their clinical and cost management programs.  Express Scripts is attempting to differentiate itself by a behavioural economics approach it refers to as consumerology.  Much of the focus of the earnings call was on the impending acquisition of Wellpoint’s PBM business.  (Express Scripts Transcript)

CVS is a more complex company, because it has a very large retail pharmacy business along with the PBM sector.  The company describes the PBM as doing well, but much of the discussion was about efforts to use the PBM business to drive traffic to the retail pharmacies.  The company believes any reform will likely be positive for their business.  CVS referred to the joint venture with the Alere divisison of Inverness as an example of how it helps deliver services that lower costs and provide better clinical management.  Reading between the lines, the firm’s PBM sales are relatively slower than those of its major competitors.  It described the Minute Clinic business as growing, but also said that it would not break even until the first half of 2012 at the earliest.  (CVS Caremark Transcript) 

PBMs have performed well for a number of years and they appear to still be delivering significant value to their customers in controlling drug costs.