UnitedHealth confirmed to us in a call that OptumRx has been selected, once again, to replace CVS in a major PBM contract. The General Electric win is important not just for the $300mm in revs it represents, but more because General Electric is widely regarded as one of the most sophisticated HC buyers in the commercial market and not just on price. Optum now has at least $2.3B in major competitive wins across all customer types, with & without UnitedHealthcare coverage…
The knock on OptumRx has been that it could either only win government/quasi-government contracts or only if there was synchronicity with UHC’s coverage. In the last month, OptumRx has won contracts with and without UHC, government/quasi-government and commercial and with some of the most sophisticated buyers of HC coverage in the country. Moreover, these are major contracts that UnitedHealth couldn’t have won if it didn’t have broker/consultant support; if the integration of Catamaran hadn’t gone smoothly and if the suite of innovative clinical-technology services didn’t prove out in testing as well as in concept.
In short, we think buyers understand that it’s not just PBM services replacing PBM services that is the compelling value, but it is the moving forward of PBM functions into more clinical and customer-facing functions that drives future improvement in outcome and value, i.e., the Optum part of OptumRx, that is helping Optum to win this business. We think this win, given General Electric’s historic innovation and sophistication in health care benefits, is an especially important proof of concept for OptumRx and potentially troubling for legacy PBM businesses that are more geared toward scale-driven efficiencies for price competitiveness…Perhaps some PBM rethinking is in order. Buy $156PT.
Date: June 13, 2016