In the case of specialty drugs, CVS is now the largest supplier and dispenses about 25% of prescriptions in the $86 billion business. Mr. Merlo expects these therapies to grow to 50% of total pharmaceutical spending, from 38% today, as innovations for unmet medical needs—or even common conditions like high cholesterol, which will be targeted by the forthcoming PCSK9 inhibitors—come to market.
So what to do? Think of an “illustrative trend” of a 20% growth rate in specialty drug costs, Mr. Merlo says. He estimates that CVS Caremark, which covers 65 million people, can erase as much as 16 percentage points. PBMs create tiers of preferred drugs, for example, which give patients an incentive to choose cheaper generics over name brands. Other management tools, like drug formularies, narrow pharmacy networks, care coordination, step therapy and the like, can add to the savings.