Rite Aid buys PBM EnvisionRx

In a move widely seen as a way to better compete with the other major chain drugstores, Rite Aid Corp. has announced an agreement on Feb. 11 to buy the pharmacy benefits manager (PBM) EnvisionRx for about $2 billion.

Rite Aid will pay the investment firm TPG about $1.8 billion in cash and $200 million in stock for the PBM. EnvisionRx provides pharmacy, specialty pharmacy, and mail-order services and is projected to produce about $5 billion in revenues this year.

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"The acquisition of EnvisionRx meaningfully expands our health and wellness offerings, enhancing our ability to provide a higher level of care to the patients and communities we serve," said John Standley, Rite Aid’s chairman and CEO. "With the addition of EnvisionRx, we will create a compelling pharmacy offering across retail, specialty, and mail-order channels, enabling us to deliver cost-effective solutions to employers and health plans while driving growth and creating long-term value for our shareholders."

Sharad Mansukani, chairman of EnvisionRx, added: “[Our] innovative business model has always set it apart from other PBMs, and as part of a recognized pharmacy leader, will now be well positioned for further success... EnvisionRx has built a best-in-class company with tremendous potential, and as a ground-breaking PBM, it has a great future as part of Rite Aid."

EnvisionRx, headquartered in Twinsburg, Ohio, provides both transparent and traditional PBM offerings through its EnvisionRx and MedTrak PBMs, respectively. Its fully integrated mail-order and specialty pharmacy services are operated through Orchard Pharmaceutical Services. EnvisionRx will operate as a wholly owned subsidiary of Rite Aid and will be led by Frank Sheehy, EnvisionRx’s CEO.

In 2006, CVS Health Corp. bought PBM Caremark Rx for $21 billion.

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In the new health economy, the pharmacy is emerging as a central hub for health, according to Vaughn Kauffman, principal in PwC’s Health Industries Advisory practice. "Consumers have trust in pharmacists and already frequently visit retail pharmacies by proxy [quick grocery trips, etc.]. Retail pharmacies are starting to recognize their powerful potential and are focusing on vertical integration; they are expanding beyond drugs to include other basic healthcare services [retail clinics, immunizations, telemedicine, etc.] and driving volume through insurance products [eg, prescription benefits) and partnerships with payers," Kauffman said.

"In general, retailers are exerting greater control around the upstream decisions on products [PBM, formulary, network, etc.] and on downstream consumption of services [ie, targeted purchases around health conditions such as diabetes]," said Andrew Sofield, director in PwC’s Health Industries Advisory practice.

Analysts believe Rite Aid’s purchase of EnvisionRx will help it compete with the larger chains CVS and Walgreens by providing greater access into the lucrative specialty drugs market.

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Kip Piper, MA, FACHE, an advisor with Sellers Dorsey, a healthcare consultancy in Washington, D.C., called Rite Aid’s purchase of EnvisionRx a smart move. “Envision is a very capable, exceptionally well-managed pharmacy benefit manager. That will be key to the ability of Rite Aid competing in the increasingly integrated pharmacy market,” Piper said. “Vertical and horizontal integration of the pharmacy services’ market presents opportunities and challenges for health plans and independent community pharmacies.”

Piper does warn that the government must closely monitor the relationships between the large chains and PBMs. “Integrated arrangements inevitably raise concerns about transparency of pricing, passing along rebates and discounts, adequacy of networks, and safeguards to ensure interests are aligned,” he said.

F. Randy Vogenberg, PhD, RPh, a partner at Access Market Intelligence, and principal, Institute for Integrated Healthcare, Greenville, S.C., believes that for now it will be business as usual for formulary managers and payers.

“The bigger question is: ‘What will happen down the road in 2016?'", asked Vogenberg. “What will Rite Aid do, will they operate the same holistic business model as CVS and Walgreens? They operate the same type of store format as CVS and Walgreens, integrating clinics, etc.” 

The acquisition appears to be more of a vertical than horizontal play for Rite Aid, integrating different types of businesses that flow top down such as clinics rather than purchasing another pharmacy chain,” Vogenberg said.

“Retail pharmacies may see a change in 2016 as a result of the acquisition possibly narrowing the network for distribution, but not in 2015 as the plan's decisions have already been made,” he said.