Recently, CVS Caremark Corporation (CVS) decided to initiate preliminary testing of a real-time, integrated electronic prior authorization (ePA) capability for its Pharmacy Benefit Management (PBM) clients. This ePA is expected to enhance patient experience by fast access to prescription medications.
Amidst a solid progress of CVS’s PBM segment, this step is expected to encourage the company’s performance further. The company considers this pilot study to be the first step towards the development of a technical standard which will help a broad adoption of ePA.
Traditional procedure to obtain prior authorization for prescription medications is a time-consuming process for prescribers, patients and pharmacists. This system currently runs based on phone calls, faxes and hard-copy request forms. Although a few on-line solutions are available, they are neither real-time in nature nor do they work in combination with e-prescribing or electronic health record (EHR) tools. Hence, CVS expects huge demand for this new integrated ePA system in the growing market for PBM.
Over the past few quarters, CVS had been struggling with its PBM business. However, the company took several strategic initiatives to drive growth in this segment which has ultimately resulted in a robust 18.4% increase in PBM segment during the first quarter of fiscal 2011. In this quarter, PBM contributed a significant 54.1% to the total revenue to reach $14 billion. A 12-year contract to provide PBM services to Aetna customers was primarily responsible for this improved performance.
The company expects further boost in PBM in the coming years banking on the assumption of huge potentials of generic drugs. Moreover, the recent acquisition of the Medicare Part D business is a good move by the company to bolster its PBM segment further. We also believe the healthcare reform will open up a big opportunity for the company. We are currently Neutral on the stock.
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