March 13, 2018 - 322 views|
The proposed purchase of Express Scripts by Cigna is further proof of the collapse of the healthcare value chain as we’ve known it.
Another day, another healthcare intermediary is absorbed by a player intent on building scale to deliver value, control data and power up a patient-centered business model. Cigna’s announcement of its intent to buy Express Scripts is just the latest development in the ongoing compression of the healthcare value chain.
We’ve been predicting these types of healthcare value chain changes for some time. The healthcare industry has no long-term immunity protecting it from the technological and cultural trends that have disrupted other industries: mobile technologies, on-demand everything, platform-based and market-priced offerings, etc. Together, these forces are democratizing healthcare, enabling consumers to take charge and giving rise to one or more consumer-to-business (C2B) on-demand healthcare platforms. (We think Amazon could be the first in that space.) A key component of healthcare-on-demand will be tighter, smarter healthcare value chains, in which layers and players that add no value will be driven out – or will morph into new entities.
By acquiring Express Scripts, Cigna would initially gain scale, a pipeline of Blues plans and self-insured employers, and a strong foothold in the mail-order and growing specialty pharmacy businesses. It would also capture end-to-end control over and visibility into the pharmacy benefit component of healthcare. These factors could create several key business benefits, including:
This deal, and others, such as CVS’s planned acquisition of Aetna and Anthem’s intent to create its own PBM, are proof of the collapse of the healthcare value chain as we’ve known it. Too many entities have owned too many pieces of that chain and have not added sufficient value to it, whether defined as improving patient care or reducing costs.
Healthcare players must respond to continuing industry consolidation by understanding where they fit in the new tighter, smarter supply chain. We’ve envisioned a range of new business models in the industry; companies need to investigate, plan and prepare for their futures with urgency.