Managed Care Firms Bulk Up

Now, due to tough industry conditions, some experts wonder if UnitedHealth will start relying on the booming PBM business as a new vehicle for growth.

At the moment, three companies -- Medco (MHS Quote), Express Scripts (ESRX Quote) and CVS-Caremark (CVS Quote) -- dominate the lucrative PBM industry. UnitedHealth has long relied on Medco, the largest of those three, to handle most of its PBM duties. But some feel that UnitedHealth could soon bring its PBM business in-house instead.

If so, UnitedHealth would strip Medco of its largest client and could reshape the PBM landscape as a whole.

To be sure, UnitedHealth looks interested. Through its 2005 acquisition of PacifiCare, UnitedHealth picked up a major PBM in RxSolutions. Since then, UnitedHealth has added Fiserv's Innoviant PBM as well.

This week, Credit Suisse analyst Glen Santangelo listed some examples of additional steps UnitedHealth has taken toward becoming a major PBM player. In October, Santengelo noted, UnitedHealth completed construction on a huge mail-order pharmacy -- now operating at just 30% capacity -- in Overland Park, Kan.

Two months later, UnitedHealth decided to handle PBM claims for its Medicare Part D customers itself. More recently, Santangelo added, the company has gone on to hire some key PBM managers as well.

Furthermore, Santangelo stressed, UnitedHealth CEO Stephen Hemsley has touted the company's PBM business in two of its last three conference calls. Notably, in one of those calls, Hemsley compared its own RxSolutions quite favorably to Medco, the PBM it has been relying on for years.