UnitedHealth brings back PBMs in house

UnitedHealth Group (NYSE: UNH) is poised to make a splash in the pharmacy benefits management arena as it signals that it will take back the $11 billion drug benefits business it outsourced to Medco Health Solutions when its contract expires next year. The move is considered an attempt by UnitedHealth to seek growth in new areas, Reuters reports.

UnitedHealth's business is "emerging as a preferred alternative to the three largest PBMs," CEO Stephen Hemsley told an investor conference last week. Meanwhile, UnitedHealth's OptumRx unit is winning union and municipal contracts, as well as targeting employer accounts, including those who use its competitors' health insurance plans. UnitedHealth expects OptumRx to bring in as much as $19 billion in revenue this year, up about 14 percent.

"It's an unexploited growth opportunity, given that they do have an asset that is capable of competing with the Big 3," said Brian Wright, an analyst with Citadel Securities, who covers both PBMs and health insurers.

OptumRx CEO Jacqueline Kosecoff told Reuters that the company is "very interested in the employer market" and is "getting very aggressive on bidding some very large accounts."

Bringing the Medco business in-house would increase OptumRx's prescription volume by about 50 percent to more than 500 million total annual prescriptions, which would help UnitedHealth close the gap between CVS Caremark Corp and Express Scripts, thereby better positioning the insurer to negotiate greater drug discounts.

Among its selling points, UnitedHealth can offer flexible plans for employers and draw on its own data analysis division that includes 1 billion in health claims, Reuters notes.

However, history doesn't seem to be on UnitedHealth's side. Insurer-owned PBMs like OptumRx do not have a strong record of carving out drug plans from employers using a rival health insurer for other benefits, said Chris Robbins, CEO of Arxcel, which consults for businesses on their pharmacy benefits.

To learn more:
- read the Reuters article

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