Over the past decade, Express Scripts (NASDAQ:ESRX) has been a significant beneficiary of three industry trends: increased generic penetration, mail order pharmacy growth, and industry consolidation. The past round of mergers—CVS/Caremark, Express Scripts/Medco Health Solutions (Medco), and SXC Health Solutions/Catalyst Health—has created an oligopolistic market structure where the top three players now control over 65% of industry volumes.
Following its merger with Medco in 2012, Express Scripts became the largest PBM in the United States. The company now generates over $100 billion in annual revenue and manages 1.3 billion claims, or 30 percent of all U.S. prescription claims. Today, the company operates three vertically integrated businesses: a basic pharmacy benefit manager, a mail order pharmacy, and a specialty pharmacy. Express Scripts has achieved measurable growth by providing patients with generic drugs. With multiple equivalent treatments available, the company has used its buying power to save money for customers and generate profits; its mission is well aligned with customers looking to reduce health care and pharmacy cost trends. This strategy has boosted generic drug penetration to high levels. Continue Reading »