Humana Plans to Acquire a PBM in Vertical Industry Consolidation

December 18, 2019 - Humana announced that it is pursuing a vertical consolidation deal with Enclara Healthcare, one of the largest hospice pharmacy and benefit management providers (PBMs) in the country.

Humana will purchase the PBM from Consonance Capital Partners and Enclara management. The deal encompasses Enclara Pharmacia, GuidantRx, and Avanti Health Care Services. The companies have not disclosed any information regarding the financial aspect of this deal. They do not expect that the deal will significantly impact Humana’s 2020 earnings.

“Enclara represents a logical extension of Humana Pharmacy’s strategy given the company’s unique ability to play a role in advanced illness care and supplement our existing care delivery system,” said Scott Greenwell, PharmD, president of Humana Pharmacy Solutions. “We look forward to leveraging and expanding the capabilities of Enclara to further advance our clinical management expertise.”

Humana noted specific goals that it has for this partnership, particularly related to their senior population.

Enclara Healthcare’s focus is on chronic disease management and care coordination for patient populations with complex needs. As such, Humana intends to leverage this partnership in order to expand its care coordination and comprehensive care approach, especially in the areas of hospice care and mail order pharmacy procedure.

Part of Enclara’s strategy when tackling complicated healthcare needs involves real time data and predictive analytics collected and parsed by advanced technologies. Humana intends to employ this strength to improve its “technology stack” for home healthcare pharmacy services. In particular, Humana mentioned that it will be looking to develop and improve its enhanced mobile medication management and EHR data.

Currently, Enclara serves a population of more than 450 hospice providers and 97,000 hospice patients. The company manages this large consumer base with scalable models. Each one is customized for the hospice it serves.

The deal harkens to a similar move by major competitor, Cigna, when it acquired Express Scripts.

Cigna’s transaction cost $67 billion. Like Humana, Cigna stated that its aim for the acquisition was to facilitate better comprehensive care. Whereas Humana is focused on chronic disease management and hospice, however, Cigna’s partnership with Express Scripts was less targeted.

As a result of that partnership, Cigna experienced a dynamic year in 2019 with a couple major pharmacy developments.

In April 2019, the combined company cut insulin out-of-pocket costs by an average of at least 40 percent.

And in September 2019, the payer leveraged its PBM to bring down expensive gene therapy costs through its new program Embarc Benefit Protection. Payers like Cigna pay eviCore a per-member per-month rate to join a gene therapy network. Then, whenever a member needs gene therapy, the treatment is covered with no out-of-pocket costs.

By October 2019, Cigna saw successful revenue growth, which the payer attributed to the Express Scripts acquisition.

“Cigna's strong results and continued momentum reflect the differentiated value we create for our customers and clients,” David M. Cordani, president and chief executive officer, said at the time. “Our combination with Express Scripts enables us to leverage industry leading capabilities and more rapidly innovate to enhance clinical and cost outcomes for those we serve.”

In spite of these positive examples, vertical mergers such as Humana’s with Enclara have gained mixed reviews from consumers.

A recently published PricewaterhouseCoopers report found that most consumers are not sure what to think of healthcare mergers. 

Fifty percent of consumers neither agreed nor disagreed that healthcare mergers would result in having access to higher quality providers. Forty-five percent neither agreed nor disagreed that healthcare mergers would result in more personalized care and the same number felt ambiguous about whether more innovative products and services would stem from these deals. Forty-two percent were not sure whether healthcare mergers would lower costs.

However, for those who had a defined opinion, most were positive. A little over four in ten agreed that innovative products and services would come from healthcare mergers and 38 percent thought they would lower healthcare costs.

Humana’s deal with Enclara is expected to close in the first six months of 2020, although this is subject to receiving state and federal approvals and to the speed and success of the closing conditions.