🖤 Donations of all sizes power our public service journalism Give Now

Caremark gets another offer to consider

Kai Ryssdal Dec 18, 2006

KAI RYSSDAL: Caremark. Sounds like it could be a knockoff greeting card company. Actually, it’s what’s called a pharmacy benefit manager — PBM for short.

It buys prescription drugs from pharmaceutical companies and resells them to pharmacies across the country. Last month, Caremark agreed to a $21 billion buyout offer from drug store chain CVS.

Today, the company’s shareholders got an even sweeter offer from another PBM — Express Scripts. The deal would unite the country’s second- and third-largest PBMs.

Steve Schondelmeyer teaches pharmaceutical economics at the University of Minnesota. He said the Express Scripts offer may make regulators nervous.

STEVE SCHONDELMEYER: We already have a highly concentrated market for pharmacy benefit managers in the first place. The top three, which would become two, already account for 80-plus percent of the whole marketplace.

Now what does all of this merger talk mean for consumers? One school of thought says that the combined buying power of Caremark and Express Scripts will lower drug prices. But Professor Schondelmeyer’s not so sure.

SCHONDELMEYER: The traditional PBM model hasn’t necessarily gotten lower manufactured drug prices that have been substantially passed on, because if you look at the drug trend over the past decade, we’ve been most of the time in double-digit increases at a time when overall inflation’s 2 to 3 percent.

Caremark said today that it’s reviewing the offer, but that it is bound by the terms of its deal with CVS.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.