Rite Aid’s pharmacy benefit manager is beating some expectations as a steady growth engine for the embattled drug store chain during a period of consolidation and scrutiny on drug pricing.
In the wake of Rite Aid’s plummeting stock price, executive suite shakeupand two failed mergers, the growth of the PBM EnvisionRxOptions is eclipsing some goals during a turbulent time for the industry. The PBM could help Rite Aid become an attractive buyout target.
Rite Aid executives are stressing its PBM business model as the Trump administration and Congress intensify their focus on the PBM’s role as a middleman between drug makers and consumers and its share of rebates — the portion of the drug returned by the seller to the buyer.
“The transparent PBM model is an important option right now, and no organization has more experience with it than Envision,” EnvisionRx CEO Ben Bulkley, who joined Rite Aid earlier this year, told analysts on a call last week to discuss fiscal fourth quarter earnings.
The growth of Rite Aid’s PBM has triggered speculation that EnvisionRx could be key to the drugstore chain’s future if the company tries to find another merger partner. Rite Aid’s board is amid a search for a new CEO to replace John Standley who is leaving once his successor is named, the company said a month ago.
Some investors who opposed Rite Aid’s failed merger with the grocer Albertsons have thought EnvisionRx was undervalued and would like to see the PBM sold to boost Rite Aid’s beleaguered stock price, which is now hovering around 50 cents a share.
Rite Aid didn’t begin to instill optimism among investors generally after the company said last week ongoing prescription reimbursement pressures helped contribute to a $255.6 million loss from continuing operations in the period ended March 2. Fourth quarter revenues were largely flat at $5.38 billion compared to $5.39 billion in the year-ago quarter.
But Envision CEO Bulkley said the quarter results included a “$4.5 million increase in adjusted EBITDA primarily driven by continued growth in Medicare Part D enrollment.” Bulkley said Rite Aid’s Medicare part D drug plan business now has “roughly 635,000 enrolled” for 2019. “In terms of open enrollment for the planned year 2019, we added 95,000 new lives,” the PBM’s top executive said.
“We expect Med D membership to grow over 10% for the planned year 2019,” Bulkley said. “The strategic decisions over the last few years are beginning to pay off. Most notably our number of chooser members in our plans has increased from 77,000 in calendar 2016 to 352,000 today.”Bulkley also said Envision has added new commercial clients that will add more than 220,000 lives to its PBM business for 2020.
Rite Aid’s PBM is much smaller than UnitedHealth Group’s OptumRx, Cigna’s Express Scripts PBM and CVS Health’s Caremark PBM but some believe there will be more consolidation as bigger players are forced to grow by acquisition given new rules could limit other revenue growth.
“Envision is well positioned to take advantage of the consolidation that is occurring in the marketplace,” Bulkley told analysts last week. “In addition, we’re also excited about how Envision can play a key role in defining an integrated value proposition for payers as Rite Aid positions its unique assets to drive the greatest value to the enterprise.”
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