SXCI has a bunch of x Caremark guys? Note CEO. Very sharp guy.
I wasnt around for Baxter days but I hear after Baxter it wasnt pretty.
Really until a few guys took caremark to another level, and then eventually its all about greed.
CVS is definitely doing something with Caremark. I am sure MHS and ESRX do not like it, as they have trashed the PBM industry in order to get some contracts, note zero sum contracts.
WAG is still a sitting duck. They will lose marketshare, really the only bullet in their gun is cost cutting. In chicago the CVS stores that were once low volume have more traffic. This is coming directly from WAG, especially in Chicago.
I think for anyone to understand the future of this business you have to understand the costs/profit for a prescription. There are multiple pieces. Employer to PBM, PBM to retail or Employer to PBM, and PBM in house mail. Yes thats simplified but now look at the most utilized drugs and this gives you a good picture of where the money is.
"Employer" to PBM is not the way MHS is headed from what I have read. Follow MHS's direction, it will give you a in-site into what the market judges as value. Cost of a prescription depends on what country you are in and profit is in how a contracted provider controls healthcare spend, Bottom line.
In order to survive in this sector unique services that add value and reduce spend are the factor's that will win. with competition of course.
A competitive advantage that cannot be sustained is the course walgreens has taken with there latest buyout of D/R,and patient files. Remember 80+ % of scripts are payed by a 3rd party. PBM's first targeted maintenance med's for a reason High repeat volume with a revenue/cost structure that can be predicted and modeled as advances develop. Utilization of a Payors drug spend is a retrospective review. and is the basis for a RFP that both Caremark and Walgreens overpaid Exec. do with there days, replying to RFP's. I am given you My simple version..
SXCI might be a buy as it gains in PBM's market share, until it develops unique services I judge it as a ME too product that will compete on price.
And I was around for the Baxter days, with another fortune 500. And I didn't judge my accomplishments on how many US states I had been too..
MHS is the purest PBM with the most services. MHS may have margin pressue as CVS goes after price. I read a survey where employers ranked Price as the number one factor in the decision making process, followed by service.
I see more closed market systems on the horizon, similar to Maintenance Choice. UNH, Humana I think were talking about this as well. WAG has never used WHI to steer business into their stores. They had an opportunity but failed. CVS will pick up business on price. I was researching leading utilized generics, it appears the PBM would make more than the retail pharmacy. For example, simvastatin pays like 11 cents a pill.
I am looking at selling July 70 put for SXCI. Earnings in August.