Amazon/PillPack Deal Has Limited Effect on PBMs

From RADAR on Drug Benefits

Amazon recently unveiled its plan to purchase PillPack — a tech-enabled startup that offers pre-sorted dose packaging and home delivery of prescription drugs for those taking multiple medications — yet industry analysts do not appear convinced that the acquisition will have a significant effect on PBMs or health insurers, at least not in the short term.

"We do not expect any material impact on our financial expectations for the MCOs we cover and thus we make no change to our estimates or ratings," Credit Suisse's A.J. Rice wrote in a research note.

If Amazon/PillPack ultimately lowers costs or drives better prescription drug adherence, that could be beneficial to a health plan's cost structure, Rice wrote. Also, PillPack already works collaboratively with benefit managers, as it's an in-network provider for most PBMs and health plans, he pointed out.

But Leerink's David Larsen had a different take based on a recent call with insurance executives, as two plans he worked with said they don't want members to use PillPack because the discounts that they have in place with Express Scripts Holding Co., and their own retail pharmacies, are greater than what they would get with PillPack.

To David Dross, leader of Mercer's managed pharmacy practice, the bottom line is that "I wouldn't see [Express Scripts], CVS and Optum trying to make it easy for Amazon to enter the pharmacy space. So I think whatever they can do legally, they probably will."

Even if PBMs exclude Amazon/PillPack from their networks, members could opt to pay for their lower-cost generics out-of-pocket, Larsen wrote, adding that the convenience of ordering through Amazon "may outweigh the need to stay in-network in some cases."

By acquiring PillPack, Amazon will get pharmacy licenses in all 50 states. Some experts argue that Amazon is more likely to partner with Express Scripts, Optum Rx and Magellan Health Inc. than build or buy a PBM. 

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