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The New York Times reports that health insurance provider Anthem announced yesterday that “it plans to start its own business to manage prescription drug plans by partnering with CVS Health, the large pharmacy benefit manager and drugstore chain.”

The new business will not start until 2020, which is when Anthem’s contract with pharmacy benefits manager Express Scripts expires; the two companies have been in what the Times characterizes as a “bitter legal battle” over Anthem accusations that it is being overcharged.

The “savings from the new arrangement to be about $4 billion a year, the bulk of which it said would flow to customers in the form of lower drug costs.” Anthem says it believes that the deal make it “better able to manage the health of its existing insurance customers. By more closely monitoring its members’ use of prescription drugs, Anthem says it can lower overall costs by making sure customers get the care they need and reducing expensive hospital admissions as a result.”

The new company will be called IngenioRx.
KC's View:
As much as there is competition in the pharmacy benefits management business, there is considerable speculation that Amazon has its eye on trying to capture a segment of it, possibly through an acquisition. This deal, if I understand it correctly, would allow both CVS and Anthem to create a barrier to entry … or at least make the category seem a little less hospitable.

I didn’t realize until reading the Times piece that Anthem was in this business until it sold this part of its portfolio several years ago. Now, one exec says, the “landscape has radically changed” and, he says, “We feel we need to pivot.”

That’s true for almost everyone.