As consolidation increases, payer and organized provider buying power similarly increases—and biopharmaceutical manufacturers must demonstrate the economic and clinical value of their products in relation to other products and therapeutic options. Some of the most recently announced and notable health plan, PBM, retail pharmacy, specialty pharmacy, and clinic provider consolidations include: CVS Health + Aetna; Cigna + Express Scripts; Walmart + Humana; Walgreens + Prime Therapeutics; UnitedHealth + Genoa Healthcare; and Anthem + Ingenio. These consolidations may impact drug access, coverage, and reimbursement, and these customers will likely pressure manufacturers for greater discounts.

Hospital M&A activity in 2018 continued to accelerate after a record increase in 2017. Based on this continued growth, it is anticipated that there will be a growing influence of large regional and national health systems, as hospital M&A is unlikely to slow down, which may further impact formulary access and coverage decisions. As IDNs grow in size, they have the potential to bypass payers by contracting directly with employers. An example of an early adopter in this space is General Motors and Henry Ford Health System. They have signed a direct contract to provide a wide range of healthcare services for as many as 24,000 patients in southeast Michigan. Henry Ford must hit an annual financial budget, and key quality, cost, and utilization of services metrics.

Consolidation between the larger players has resulted in subsequent M&A opportunities for mid-tier entities. Specialty pharmacy provider and pharmacy benefit manager combinations such as Diplomat + CastiaRX allow medium-sized, independent SPPs entering the PBM market to offer traditional PBM services with broader depth to address the intricacies of specialty pharmacy management under both the pharmacy and medical benefit. These consolidations may require biopharmaceutical companies to reassess specialty distribution networks.

Finally, consolidation continues within specialty provider groups due in part to payment reform (eg, MACRA) with the formation of virtual provider groups to maximize positive bonus payment opportunities and the growth of group practices that are either owned or affiliated with hospital systems. Consolidation of provider groups has resulted in contracting with manufacturers for purchase discounts, similar to GPOs.