Pharmacy Benefit Managers as Conflicted Countervailing Powers

Abstract

While it is possible that large resellers can be countervailing and pro-competitive, we believe that the merger of Express Scripts and Caremark, two of the three largest pharmacy benefit managers (PBMs) would be anti-competitive. The economist George Stigler was skeptical of Galbraith's optimism that an intermediate market countervailing power would behave asymmetrically - a powerful buy-side opponent to up-steam oligopolists, but a benevolent agent of down-stream consumers. Our analysis of the evolution and current behavior of large independent PBMs confirms Stigler's skepticism.