Independent Boutique PBMs: The Last Unbiased, Strategically Aligned Service Provider
In today’s business environment, being independent as an organization has more value than ever before. For decades, entrepreneurs have started and grown companies with their own unique approach to providing solutions. Every truly independent business is driven by the values and work ethic of its owner and founder. Starting in the early 2000’s, acquisitions moved to the forefront of business. Private equity became a dominant part of the financial fabric of our nation. Many wealthy individuals stopped buying stocks and bonds and decided that they would make more money by acquiring independent businesses. Not only would they acquire a business but they would bolt on additional entrepreneur-based businesses to create larger organizations. This “buy and bolt” strategy was designed to grow a business and flip it within five years. This trend has become a dominant model for business in the United States. Although it creates larger service-based entities, it becomes a real problem in trying to select a long-term vendor who will change hands every five or so years. The private equity owners of these bolt on businesses try to recoup their financial investment with a new sale to a larger organization never considering the impact to the clients. The end result is the disappearance of small, entrepreneurial-based, service-oriented entities replaced by large organizations who lack individual character and a truly unique value proposition. To find a service provider in today’s market that is independent is truly rare.
In many service industries, such as the pharmacy benefits management industry, the big PBMs continue to grow into behemoth organizations losing the unique character and value that the entrepreneur dreamed of years ago. Many of these massive PBMs cannot truly call themselves independent. They are either own by or controlled by pharmacy chains, hospital systems, network providers, or even larger private equity groups. The result of their lack of independence as a service provider is that they can no longer focus all of their attention on what is in the best interest of their client. Massive PBMs are driven by share price maximization, formulary rebate contracts, driving prescriptions to wholly-owned subsidiaries or maximizing short-term profits for a future sale. In today’s market, it is increasingly important to view your vendors in a long-term, strategic manner. Vendors who are independent of outside influence are more nimble and able to make adjustments to satisfy the growing needs of their clients. Choosing a vendor should be more about a personal and strategic connection that aligns business goals without the bias found in the massive industry leaders. A small business might find it easy to select the biggest PBM in the industry because they believe that it is safe and secure. In many cases the opposite is true. Small PBM vendors are quick to respond, eager to please, and value the client’s long-term engagement much more than the giants in the industry. As an organization looks to grow and expand, they need service partners whose primary focus is on their client’s needs and objectives, not the objectives of the shareholder.
As you watch PBMs be acquired to a larger organization you will often find boutique PBMs start up in the industry. A boutique PBM is a small, dedicated, strategically narrow-focused solution provider who has lost confidence in the ability of the giant industry leader to serve today’s needs. Motivated by a strong belief that they can and will provide value that the client truly needs, the boutique PBM seeks a foothold in the industry. This truly independent service provider is in many ways the very best vendor for a growing and dynamic organization.
MARK LEWANDOWSKI PH.D, CM&AA