The American health care system has become one giant health care industrial complex………….
Article provided by Brian Klepper, Phd.
The CIGNA – Express Scripts Merger––So Much for Price Transparency and Competition
Posted by Robert Laszewski on 3/08/18
CIGNA just announced that it will buy pharmacy benefit manager (PBM) Express Scripts for $67 billion. In December, CVS said it would buy Aetna for $69 billion.
Already, UnitedHealth, through its Optum data technology and OptumRx pharmacy benefit manager subsidiaries, has detailed health care utilization information on over 115 million consumers, four out of five hospitals, 67,000 pharmacies, 100,000 physician practices, 300 health plans, and government agencies in 34 states and D.C.
Remember the good old days when we complained about the health insurance company oligopoly with just a few players controlling most of the market share in any given market?
We appear to be quickly on the way to a new and different kind of oligopoly controlling an even wider swath of the market with these new health care system aggregators being created.
Ironically, the new 2018 health care policy and market buzzword is “price transparency.” No more than in the prescription drug market where consumers and benefits managers complain that prices just keep going up and the whole thing is just one big black box full of middlemen making billions in profits for themselves––Express Scrips reported $4.5 billion in operating profit over the past 12 months.
Well, the big black box of pharmaceutical pricing opacity is about to get bigger and darker. The three biggest PBMs––OptumRx, CVS Caremark, and Express Scripts––already control 72% of the U.S. market. Now, they will be controlled by aggregators UnitedHealth, Aetna CVS, and CIGNA.
Fans of these deals argue these new companies will bring more leverage and information to the table in order to control prices. Like the current black box isn’t already big enough to do that if that was their real goal?
This is sort of like the fox buying the hen house.
But they still argue this is ultimately going to be in the best interest of patients, taxpayers, and benefits buyers.
Do you really think that these companies are going to spend $67 billion or $69 billion in shareholder money and their first priority will be to make the system more transparent and reduce prices? The first priority will be to Wall Street where these executives are now pleading their case that giving them all of this money will increase the profits shareholders are already getting from the ownership of these now separate entities.
The American health care system has become one giant health care industrial complex. Undoubtedly one of the reasons these companies are combining is to be better able to take on the consolidating provider sector. Bigger hospital systems gobbling up neighboring hospitals and physicians is only begetting bigger and more integrated health care payers in a battle between giants over who can hold onto the most money.
And, the employer benefit manager, the taxpayer funding things like Medicare and Medicaid, and the patient/consumer just stand on the sidelines watching the system getting more powerful and opaque.
The only thing that will be powerful enough to challenge these aggregators is going to be the U.S. government. Ironically, the market’s current course may be taking it straight to more government control.
Oh, for the good old days of the insurance company oligopoly.
Posted by ROBERT LASZEWSKI at 4:20 PM