Mehta Analysis: Welcome To The PBM Realm, Derica Rice and Andrew Witty

As two high-profile
pharma veterans make their move into pharmacy benefit management leadership,
Viren Mehta, founding partner of Mehta Partners LLC, ponders the challenges
they face and the impact their actions will have on the pharma industry.

Yet another exposé
about the drug cost conundrum that the pricing strategies of pharmacy benefit
managers (PBMs) pose for the industry was detailed mid-March in the Financial
Times. This report, down to the penny, showed how many of the widely used drugs
incur as much as a three-fold spread in their cost between the manufacturer and
the consumer by the time all the middlemen interests are served. The FT
investigation of the death of a 38-year-old Texas teacher who delayed filling
her Tamiflu prescription when she was asked to pay at the upper end of this
spread puts this conundrum in sharp relief.

This negative
publicity came only a few days after two leading PBMs announced that they had
persuaded experienced biopharma industry leaders to lead their organizations.

These two PBM
appointments coincided with President Trump promising to unveil his healthcare
cost control plans ‘next month’ – presumably in April 2018. This can be
expected to complicate the vision and the strategy of these two pharma
executives as they switch sides.

Derica Rice leaves his
position as the CFO and EVP of Global Services at Eli Lilly &
in Indianapolis to become president of CVS Health Corp.‘s
Caremark PBM, where he will run operations as well as drive strategy, business
development and client relationships.

Andrew Witty stepped
down from his board position at UnitedHealth Group to become CEO of Optum, an

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