U.S. Pharmacy Benefit Management (PBM) Market Report

U.S. Pharmacy Benefit Management (PBM) Market Analysis Report By Business Model (Standalone, Health Insurance Providers, Retail Pharmacy), By End Use (Commercial, Federal), And Segment Forecasts, 2019 - 2026

  • Published Date: Mar, 2019
  • Base Year for Estimate: 2018
  • Report ID: GVR-2-68038-826-8
  • Format: Electronic (PDF)
  • Historical Data: 2015 - 2017
  • Number of Pages: 100

Industry Insights

The U.S. pharmacy benefit management market size was valued at USD 368.3 billion in 2018. It is expected to expand at a CAGR of 9.2% over the forecast period. Increase in healthcare expenditure has played a pivotal role in the development of the market. Besides this, rising prevalence of chronic conditions and growing preference for vertical integration within pharmaceutical distribution systems have been augmenting the market in the country. 

The demand for pharmacy benefit management services is on the rise owing to increase in the number of insurance providers with in-house pharmacy benefit groups to manage covered population. PBM systems lower the overall costs by combining health plan customers together to form bigger networks that enable negotiations and discounts.

U.S. Pharmacy Benefit Management Market

Majority of drugs in the market offer similar mechanisms of action resulting in a minimal difference between APIs, ultimately increasing the price sensitivity of these drugs. PBMs release drug formularies that include all drugs covered under their benefit plans, wherein manufacturers are receptive to offer discounts. Manufacturers who add their drugs under PBM formulary list significantly remunerate PBMs. This provides PBMs with an additional influence over prescribing decision in the form of prior-authorization requirements, even allowing them to interrupt patient treatments.

PBMs operate with specialty pharmacies to enable beneficiaries with better adherence. These systems provide wide expertise and connections with pharmaceutical companies that can be beneficial to establish drug contracts. Payers find it difficult to establish value-based contracts with pharmaceutical companies. Therefore, payers promote themselves as negotiators and tend to receive considerable discounts on prescription drugs.

The growth of the market is being driven by vertical integration, especially post two major alliances of CVS-Aetna and Cigna-Express Scripts. The supply chain dynamics is predicted to change considerably in the coming years, especially post these mergers. Partnerships of pharmacy benefits management organizations with health insurance companies are estimated to further benefit the growth of the market and role of PBMs in decision making process. Key alliances in the market will improve affordability and personalization of health insurance plans and provide more alternatives through better alignment with healthcare professionals.

Business Model Insights

Standalone pharmacy benefits management held the leading revenue share in the market in 2018. It included major players such as CVS Health and Express Scripts who underwent major mergers by the end of 2018. The merger trend was introduced recently in this market as the Federal Trade Commission (FTC) refused many applications for mergers in the past, mainly between pharmaceutical players and PBMs.

The mergers were anticipated to allow drug manufacturers to manage pricing policies and to understand pricing information of competitors. However, the market experienced consolidations between PBMs and health insurers leading to strengthening of key players in the market. Key mergers will be effective from 2019 along with other agreement and alliances that will change market dynamics over the forecast period.

End Use Insights

Based on end use, the U.S. PBM market has been bifurcated into commercial and federal. The commercial segment is anticipated to dominate the market throughout the forecast horizon. Majority of the U.S. employees are enrolled under commercial private insurance plans to benefit from copay system for high-cost drugs.

U.S. Pharmacy Benefit Management Market

Federal support is significant for government employees wherein premiums vary for different health plans and are paid in part by employers and employees. Employers usually pay up to 72.0% of the total amount in an average plan for self-only or family coverage while employees pay the rest.

U.S. Pharmacy Benefit Management Market Share Insights

Some of the key players in the U.S. Pharmacy Benefits Management (PBM) market are CVS Health; Aetna; Express Scripts; Cigna; OptumRx, Inc.; Walgreens Booth Alliance; MedImpact Healthcare Systems, Inc.; Anthem; and Rite Aid. Some of the strategies undertaken by these companies to strengthen their market presence include mergers and acquisitions. For instance, In November 2018, CVS Health and Aetna concluded their merger for a transaction worth USD 69 billion. The merged company consists of divisions for PBM, retail pharmacy, a Managed Care Organization (MCO), and an outpatient provider in the U.S., all under one parent organization.

For 2019, CVS proposed to start testing stores with additional services. The new stores will manage common chronic conditions along with adding more primary health services at CVS MinuteClinics, a clinic facility chain enabling members with same copayment as their primary care provider without a referral.

Report Scope

Attribute

Details

Base year for estimation

2018

Actual estimates/Historical data

2015 - 2017

Forecast period

2019 - 2026

Market representation

Revenue in USD Billion & CAGR from 2019 to 2026

Country scope

U.S.

Report coverage

Revenue forecast, company share, competitive landscape, growth factors & trends

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Segments Covered in the Report

This report forecasts revenue growth at country level and provides an analysis of the industry trends in each of the sub-segments from 2015 to 2026. For this study, Grand View Research has segmented the U.S. pharmacy benefit management market report based on business model and end use:

  • Business Model Outlook (Revenue, USD Billion, 2015 - 2026)

    • Standalone PBM

    • Health Insurance Providers

    • Retail Pharmacy

  • End-Use Outlook (Revenue, USD Billion, 2015 - 2026)

    • Commercial

    • Federal

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