As applied to pharmaceutical company-PBM mergers, the theory suggests that an integrated manufacturer might charge a rival PBM more for its unique products than it charges its own PBM, thereby placing rival PBMs at a competitive disadvantage. A review of the early market responses to the manufacturer-PBM mergers indicates the "realignment" theory, so far, best explains the effect of vertical integration. Independence may even be a benefit. Caremark, an independent PBM which has supply arrangements with four major drug manufacturers, recently renewed a pharmacy contract covering 150,000 lives when the employer "ruled out two other competing vendors - DPS and Medco - because of their alliance with drug makers." Robert Pfotenhauer, former chief executive officer of Pharmacy Direct Network (the pharmacy-owned PBM), said PDN "has an opportunity to help level the playing field and ensure that there will be fair competition" and is predicted to be "a significant entity that will have some fairly immediate impact on the prescription benefit management world." Bill Jenison, president of Pharmacy Gold, said the pharmaceutical company-PBM mergers will allow his independent PBM to "leverage more enrollment because of our clinical objectivity and independence." With existing PBMs prepared to handle increased market share, and new PBMs forming, the arguments that the manufacturer-PBM mergers increase the barriers to entry into the industry, or foreclose unique products or services, are weakened. Additionally, no pharmaceutical company makes every drug on a formulary list, so the possibility of strict foreclosure is diminished because the PBMs must maintain supplier relationships with other manufacturers. A different issue arises from these continued supplier relationships concerning more subtle ways in which
As applied to pharmaceutical company-PBM mergers, the theory suggests that an integrated manufacturer might charge a rival PBM more for its unique products than it charges its own PBM, thereby placing rival PBMs at a competitive disadvantage. A review of the early market responses to the manufacturer-PBM mergers indicates the "realignment" theory, so far, best explains the effect of vertical integration. Independence may even be a benefit. Caremark, an independent PBM which has supply arrangements with four major drug manufacturers, recently renewed a pharmacy contract covering 150,000 lives when the employer "ruled out two other competing vendors - DPS and Medco - because of their alliance with drug makers." Robert Pfotenhauer, former chief executive officer of Pharmacy Direct Network (the pharmacy-owned PBM), said PDN "has an opportunity to help level the playing field and ensure that there will be fair competition" and is predicted to be "a significant entity that will have some fairly immediate impact on the prescription benefit management world." Bill Jenison, president of Pharmacy Gold, said the pharmaceutical company-PBM mergers will allow his independent PBM to "leverage more enrollment because of our clinical objectivity and independence." With existing PBMs prepared to handle increased market share, and new PBMs forming, the arguments that the manufacturer-PBM mergers increase the barriers to entry into the industry, or foreclose unique products or services, are weakened. Additionally, no pharmaceutical company makes every drug on a formulary list, so the possibility of strict foreclosure is diminished because the PBMs must maintain supplier relationships with other manufacturers. A different issue arises from these continued supplier relationships concerning more subtle ways in which