Medco and Its Peers Brace for a Flank Attack

The embattled pharmacy benefit management industry could soon face competition from its own customers.

For years, major employers have simply trusted PBMs such as Medco (MHS Quote), Caremark (CMX Quote) and Express Scripts (ESRX Quote) to hold prescription costs down. But some big companies have grown frustrated by the industry's lack of transparency and have come to doubt that the professed savings are real. Thus, dozens of companies -- including big names like IBM (IBM Quote) -- have joined forces in an effort to directly negotiate with drug manufacturers for discounts on their own.

The HR Policy Association, which formulated the idea, calls the group "the largest private-sector drug purchasing coalition ever assembled." Meanwhile, a number of states -- some seeking to regulate the industry -- have launched a similar effort. ...