BENTONVILLE, Ark. — Wal-Mart Stores has found a way to enter the pharmacy benefit management sector without officially becoming a pharmacy benefit manager. Its move sets the stage for supermarket pharmacies hoping to gain a portion of the PBM business themselves, according to industry sources.
However, retailers — even Wal-Mart — would need to follow in the footsteps of CVS/pharmacy, Woonsocket, R.I., and acquire a major PBM like Caremark, Nashville, Tenn. (the combined entity is now called CVS Caremark Corp.) to institute a large-scale change in the health benefits industry, according to retailers and analysts.
While specifics about the program have not been spelled out, Wal-Mart's effort signals two scenarios: regional or national, according to John Fegan, senior vice president of pharmacy for Ahold USA, Quincy, Mass.
If Wal-Mart is taking a more regional approach — one that supermarket retailers might also have within reach — “Wal-Mart could enter by going after companies that have a finite number of employees and operate in areas where its stores have a strong presence,” Fegan said.
Many retailers have discussed doing this in recent years, and some “do currently work specifically with smaller employers by providing them with medication therapy management or other prescription-related services.” Rather than becoming a PBM, Wal-Mart would then be providing targeted services that fit in with the health care trend at retail, he said.
Wal-Mart may also be increasing awareness among employers that retail pharmacy can provide benefit services, said John Beckner, director of pharmacy and health services for Ukrop's Super Markets, Richmond, Va.
“The opportunity for other supermarket chains is to examine their local area of reach and identify local employers,” he said. “Supermarkets should look at this as an area where they might be able to compete with Wal-Mart.”
If Wal-Mart contracts with national employers, however, “I'm not sure they have enough retail pharmacies to support that kind of program,” Fegan said.
Robert Willoughby, a Banc of America Securities analyst in New York, is sure Wal-Mart does not have enough retail pharmacies or connections in health care to secure a sizeable national presence. “We believe most payors view Wal-Mart's stores as an inadequate retail pharmacy network on a stand-alone basis, and we question whether other retail pharmacy chains would be willing to work with Wal-Mart as a demonstrated hostile competitor,” he said in a research note on the topic.
Taking Out Costs
In announcing the program, Lee Scott, Wal-Mart's president and chief executive officer, said, “This year we will be contracting with select employers in the U.S. to help them manage how they process and pay prescription claims. Our approach will be based on taking out unnecessary costs while providing high-quality health care products and services.”
He estimated that Wal-Mart could save participating employers over $100 million this year.
“They haven't said they are entering the PBM market,” said Fegan. “They are using their size to get into the management business without becoming a PBM.”
A Wal-Mart spokesman told SN the company had no comment outside of Lee's remarks.
The National Community Pharmacists Association, Alexandria, Va., is clearly concerned. Its president, Bruce Roberts, noted the lack of transparency in the PBM business and urged Wal-Mart to “provide a positive influence on the PBM marketplace.” In reference to Wal-Mart's popularizing the $4 prescription pricing plan, he said the retail giant has in the past “engaged in predatory pricing that has hurt small business and health care providers.”
“Fundamentally not all PBMs are created equal, so while others might eventually get into the PBM business, the question is how they operate,” NCPA spokeswoman Valerie Briggs told SN. “We view MemberHealth [Cleveland] as having the type of approach that avoids many of the non-transparent and predatory practices of the larger PBMs, which is a model we would like to see replicated in the future if our health care system is going to have a partnership between PBMs, pharmacies, employers and patients that is beneficial for everyone involved.”
A Food Marketing Institute spokesman told SN the association was unable to comment for two reasons: “We do not comment on individual company practices and, perhaps more important, it's not clear exactly what Wal-Mart is doing.”
According to Willoughby, no matter what Wal-Mart is doing, it does not pose an immediate threat to the PBM industry. “We do not view the company as remotely able to challenge the leading PBMs, given little leverage currently with manufacturers and payors, which it could only put in place in the near term through an acquisition of an established entity.”
It still appears to be a wise business decision, Fegan said. “And it doesn't mean Wal-Mart won't look to become a true PBM in the future,” he added.
Scott said what his company does best is what the U.S. health care system needs the most: “It needs more affordability. It needs more accessibility. It needs to be more efficient. And it needs leaders with a genuine desire to work together for positive change.”
Wal-Mart also plans to increase the use of electronic prescriptions and electronic health records by partnering with doctors and other health care providers, Scott told a recent company meeting.