In the US, a third party administrator of prescription drug program is known as a Pharmacy Benefit Manager (PBM). For more mail me: pr@konceptanalytics.com

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The US PBM Industry Report
----------------------------------------------------2013

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Executive Summary
In the US, a third party administrator of prescription drug program is known as a Pharmacy Benefit Manager (PBM). The primary
responsibilities of a PBM include processing and paying prescriptions drug claim, developing and maintaining formulary, negotiating
discounts and rebates with drug manufacturers and pharmacies. The US prescription volume has witnessed an unprecedented growth
over the past few years and the same pattern is likely to continue in the near future. Therefore, through rebates from pharmaceutical
manufacturers, price discounts from retails, and effective mail service pharmacies, the PBMs ceaselessly focus on enabling the plan
sponsors and individuals to obtain prescribed drugs at lower prices.
In order to improve the value of drug benefit and manage the cost and utilization of prescribed drugs, PBMs offer a wide range of tools
and techniques. These techniques include pharmacy network, plan design, electronic prescribing, manufacturer discounts, and clinical
management. The US PBM industry is highly fragmented with about 100 major companies operating in the marketplace, out of which
some are independently owned and operated while others are subsidiaries of major chain drug store, retail outlets and, managed care
plans.
The key factors driving growth of PBM industry include accelerating US aging population, prevalence of chronic disease, increased life
expectancy, healthcare reforms and increasing healthcare expenditure. Some of the noteworthy trends and developments of this
industry include rising Medicare enrollment, generic drug utilization, increased acceptance of specialty drugs and ongoing merger &
acquisition activities.
The report contains a comprehensive analysis of the PBM industry in the US. After the acquisition of Medco Health Solution by
Express Script, an intense competition is noted among few major players; Express Script, CVS Caremark and Catamaran. The fierce
competition prevailing in the US PBM industry has been studied on a number of parameters such as market share, prescription
volume, revenues, claims, and operational statistics, apart from others. The company profiles of leading players in the market are also
presented in the report.

3. A pharmacy benefit manager (PBM) is defined as a third party administrator of prescription drug programs
in the US.
The US Prescription Drug Market – by Value (2008-2012)
• The US prescription drug market decreased from US$.... billion in
2011 to US$.... billion in 2012 thereby marking a mild decline of
….%. However, The market had shown a consistent increase from
2008 to 2011. Further, through the period spanning 2008 to 2012,
the market increased at a CAGR of ….%
US$ Billion
• The US prescription drug market is majorly sub divided into two
parts on the basis of dispensing channels namely; Retail Channels
and Institutional Channels. In 2012, retail channels accounted for
sales equivalent to US$.... billion while the institutional channels
reported sales worth US$... billion.
•Retail channels held ….% share of the total US prescription in
2012. On the other hand, the institutional dispensing channels
represented a mild share of …..%..
2008
2009
2010
2011
2012
Percentage Share of the Dispensing Channels in the US
The US Prescription Drug Market by
Prescription Drug Market - by Value (2012)
US$ Billion
Dispensing Channels – by Value (2012)
Retail Channels
Retail Channels
Institutional Channels
Institutional Channels

4. PBM services can be divided into three important categories and their respective beneficiaries for
persuading consumer behavior: price, utilization and drug mix.
Percentage Share of Retail Dispensing Channels in the US
Prescription Drug Market – by Value (2012)
• In terms of percentage share of retail dispensing channels by
value, chain stores held highest share of …% in 2012 immediately
followed by mail services with ….% share. Further, Independent
channels and food stores claimed respective share of …% and
…%.
• Accounting for …% of the share, clinical channels held the
highest share in the US institutional channel prescription market by
value in 2012, immediately followed by non-federal hospitals with a
healthy …% share. Long-term care and federal facilities claimed
shares of ….% and ….%, respectively. Furthermore, Home health
care and HMO held almost equal shares of …..% and …..%,
respectively.
Chain Stores
Mail Service
Independent
Food Stores
•In 2012, chain stores held highest share of ….% of the total
prescription dispensed in the US, immediately followed by
moderate share of ….% of the independent retail channels.
Percentage Share of Institutional Dispensing Channels in the US
Percentage Share of Retail Dispensing Channels in the US
Prescription Drug Market – by Value (2012)
Prescription Drug Market – by Volume (2012)
Clinics
Long-Term Care
Home Health Care
Miscellaneous
Non-Federal Hospitals
Federal facilities
HMO
Chain Stores
Independent
Food Store
Mail Service

5. The key factors driving growth of PBM industry include accelerating US aging population, prevalence of
chronic disease, increased life expectancy, healthcare reforms and increasing healthcare expenditure.
US$ Billion
The US Prescription Drug Market – by Volume (2012)
• A steady and consistent increase has been noted in the US
prescription volume over past few years. The number of US
prescription inclined from ….. million in 2011 to ….. million in 2012
thereby marking an incline of ….%. Further, the growth of the
aforementioned market was observed at a CAGR of ….% during
the period spanning 2008 to 2012.
•In 2012, out of the total prescriptions dispensed in the US, retail
channels accounted for ….. million prescriptions while ….. million
prescriptions were dispensed via institutional channels.
• In terms of dispensing channels, in 2012 retail channels
accounted for …..% share of the prescriptions dispensed in the US.
On the other hand, institutional channels held a share of …..%.
2008
2009
2010
2011
2012
Percentage Share of the Dispensing Channels in the US
The US Prescription Drug Market by
Prescription Drug Market - by Volume (2012)
US$ Billion
Dispensing Channels – by Volume (2012)
Retail Channels
Retail Channels
Institutional Channels
Institutional Channels

6. PBMs obtain money from three entities: Drug Manufacturers, Plan Sponsors and Pharmacies.
Percentage Share of PBM on Adjusted Prescription
Percentage Share of Leading PBMs by PBM Revenue (2013E)
Express Script
Prime
Medimpact
CVS
Catamaran
Cigna
Optum
Humana
Others
Dispensed - Volume (2012)
Express Script
OptumRx
Humana Pharmacy Solution
Medimpact
CVS Caremark
Catamaran
Prime Therapeutics
Cigna Pharmacy Management
 Express Script is projected to claim a share of …% of the total revenue by the end of 2013, immediately followed by CVS Caremark with
….% share. The two aforementioned top notch companies strongly dominate the PBM marketplace with collective market share of ….%. It is
noteworthy that there is a big gap in the market shares of CVS Caremark and the next set of market players. The estimated shares of Optum,
Prime and Catamaran during 2013 are ….%, ….% and ….%, respectively. Express Script and CVS Caremark lead the market as they offer
plan sponsors singular focus, dedicated resources, experience, and economies of scale. Additionally, other HMOs, such as Aetna and Cigna,
outsource certain services to independent PBMs.
 Following the acquisition of Medco in 2012, Express Scripts was the largest player in 2012, with approximately ….% market share in terms of
adjusted prescription volume. CVS Caremark has roughly …..% share, while OptumRx would control approximately …..% of total scripts in the
US. Catamaran, formed following the combination of SXC Health Solutions and Catalyst Health Solutions, represents the fourth largest PBM
with about …..% share. Further, it is noteworthy that the top four companies’ collectively accounts for ……% market during the cited period.
 Within the Fortune 100 employer base, Express script led the market with an estimated share of ….% during 2012. The strong dominance of
Express Script is chiefly due to its acquisition of Medico Health Solution. CVS Caremark accounted for …..% of the Fortune 100 PBM market
share. The two top notch companies represent roughly …..% share. Other companies operating in the aforementioned segment include
OptumRx, Catamaran and Prime Therapeutics, apart from others.
Note: Market attractiveness is inverse of penetration. Low penetration means high attractiveness and vice-versa

7. Table of Contents
1. Overview
1.1 History of PBM
1.2 PBM Managers
1.3 Retail Dispensing Process & Flow of Funds
1.4 Mail Dispensing Process and Flow of Funds
2. The US PBM Market Size
2.1 PBM Market by Value
-Market Value Growth
-Breakdown by Dispensing Channels
2.1.1 Retail Channels
2.1.2 Institutional Channels
2.2 PBM Market by Volume
-Market Volume Growth
-Breakdown by Dispensing Channels
2.2.1 Retail Channels
2.2.2 Institutional Channels
2.3 Generic Drugs
-Market Overview
-Penetration Rate
2.4 Specialty Drugs
3. Market Dynamics
3.1 Growth Drivers
3.1.1 Accelerating US Aging Population
3.1.2 Rising Incidences of Chronic and Infectious Diseases
3.1.3 Increasing Life Expectancy Rate in the US
3.1.4 Escalating Healthcare Expenditure in the US
3.1.5 Healthcare Reforms
3.1.6 Rising Pharmaceutical Sales
3.1.7 Ameliorating Economic Conditions
List of Charts & Tables
List of Charts
History of PBMs
Types of PBM Services
PBM Managers Formulary Structure
Retail Dispensing Process and Flow of Funds
Mail Dispensing Process and Flow of Funds
The US Prescription Drug Market – by Value (2008-2012)
The US Prescription Drug Market by Dispensing Channels – by Value (2012)
Percentage Share of the Dispensing Channels in the US Prescription Drug
Market - by Value (2012)
Percentage Share of Retail Dispensing Channels in the US Prescription Drug
Market – by Value (2012)
Percentage Share of Institutional Dispensing Channels in the US Prescription
Drug Market – by Value (2012)
The US Prescription Drug Market – by Volume (2012)
The US Prescription Drug Market by Dispensing Channels – by Volume
(2012)
Percentage Share of the Dispensing Channels in the US Prescription Drug
Market - by Volume (2012)
Percentage Share of Retail Dispensing Channels in the US Prescription Drug
Market – by Volume (2012)
Number of Prescription Dispensed via Institutional Channels in the US (20082012)
Penetration of Generic Drugs (2003-2013E)
Estimated PBM Profitability of Generic versus Branded Scripts by Channel
(2012)
Estimated Brand Revenue Lost to Generic Launches (2012-2016E)
Specialty Market Share by Dispensing Channels (2012)
The US Aging Population (2008-2012)
The US Life Expectancy Rate (2006-2013E)
The US Healthcare Expenditure per Capita (2006-2012E)
The US Pharmaceutical Sales (2010-2012)
GNI of the US (2006-2012)
Medicare Enrollments (2005-2014E)

8. 3.2 Trends and Developments
3.2.1 Rising Medicare Enrollments
3.2.2 Trends in Drug Prices
3.2.3 Generic Drug Utilization
3.2.4 Increased Acceptance of Specialty Drug
3.2.5 Medicaid Pharmacy Program Savings
3.2.6 Penetration of Unbranded Generic Drug Prescription
3.2.7 PBM Mergers and Acquisitions
4. Competitive Landscape
4.1 Competition by Prescription Volume
4.2 Competition by Claims
4.3 Competition by Lives Managed
4.4 Competition by Specialty Pharmacy Drug Spending
4.5 Competition by Health Plans
4.6 Analysis of PBMs Operating Statistics
4.7 Competition by Customer Segment Mix
5. Company Profiles
5.1 Express Script
5.1.1 Business Overview
5.1.2 Financial Overview
5.1.3 Business Strategies
-Expansion through Acquisitions
-Unremitting Focus on Innovation
5.2 CVS Caremark
5.2.1 Business Overview
5.2.2 Financial Overview
5.2.3 Business Strategies
-Acquisitions and Collaborations
-Focus on Geographic Expansion
Drugs Price Index (2008-2013E)
Specialty Drug Spending Trend (2012 & 2015E)
Generic Drug Penetration Rate (2005-2013E)
Percentage Share of Leading PBMs by PBM Revenue (2013E)
Fortune 100 PBM Market Share (2012)
Percentage Share of PBM on Adjusted Prescription Dispensed - Volume
(2012)
PBM Market Share by Claims (2014E)
PBM Market Share by Lives Managed (2013E)
Percentage Share of Specialty Pharmacy Drug Spending (2012)
Top 35 Health Plan (Based on Lives) PBM Market Share (2012)
PBMs Pro-forma Customer Segment Mix (2012)
Revenue of Express Script by Business Segment (2012)
Express Script Revenue and Net Income (2008-2012)
CVS Caremark Business Revenue – by Segment (2012)
CVS Caremark Revenue and Net Income (2008-2012)
Catamaran’s Revenue by Business Segment (2012)
Catamaran Revenue and Net Income (2008-2012)

9. 5.3 Catamaran
5.3.1 Business Overview
5.3.2 Financial Overview
5.3.3 Business Strategies
-Expansion of Customer Base
-Broadening Services Portfolio
List of Tables
The US Dollar Spend by Retail Channels - In US$ Billions (2008-2012)
The US Dollar Spend by Institutional Channels - In US$ Billions (20082012)
Number of Prescription Dispensed via Retail Channels in the US - In Million
(2008-2012)
Potential Medicaid Pharmacy Program Savings for Top 10 States (20122021)
Selected PBM M&A Transactions - in US$ million (1993–2012)
EBITDA Multiples for Selected PBM transactions (2000-2012)
Dollar Share of Leading PBMs by PBM Revenue (2013E)
PBM Market Share Based on Adjusted Prescription Volume (2012)
Adjusted Mail-Order Penetration (Q112-Q213)
Generic Dispensing Rate (Q112-Q213)
Revenue per Adjusted Rx (Q112-Q213)
EBITDA per Adjusted Rx (Q112-Q213)
PBM Profitability Metrics (2012)

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