Some of the most heated policy debates in DC these days involve the use of big data to monitor people’s habits. This is usually attributed to powerhouses like Google and Meta. But throughout the economy, dominant firms are copying Big Tech’s business methods and causing similar, if not more widespread, damage through predatory practices. Indeed, if you want to know the dangers of big data and dominating corporate power, just ask your local pharmacist.
Recently, customers of a local pharmacist received solicitation letters from a competing specialty pharmacy named Genoa. They received those letters a day before UnitedHealthcare — one of the nation’s largest health insurers — stopped allowing its customers to get drugs from this independent pharmacist. Here’s the bottom line: It’s Genoa owned by UnitedHealthcare, bought by its Optum subsidiary in 2019. So UnitedHealthcare can use its data and power over customers to steer patients to its providers and kill local pharmacies even as communities rely on them for all medical care.
Even more irritating is that UnitedHealthcare is trying to get bigger so it can conduct even more surveillance. Last year, UnitedHealthcare proposed to buy Change Healthcare, which is America’s largest medical claims data repository. Fortunately, the Justice Department’s antitrust division, which is trying to revive anti-merger law after 40 years of inactivity, is suing the companies to block the deal. Now it’s up to District Court Judge Carl Nichols to allow this dominant firm to grow even more powerful.
Despite being vital suppliers, local pharmacists are under attack from massive vertically and horizontally merged companies.
The fate of America’s local pharmacists may hang in the balance. Independent community pharmacies are small businesses that account for over a third of all retail pharmacies. In both urban and rural areas, they are some of the most affordable healthcare providers. In addition to dispensing prescription drugs and supplements, independent community pharmacies provide vaccines, health assessment services and diabetes self-management education. They tend to be cheaper than chains and are more connected to local communities.
Although they are vital suppliers, they are under attack from massive vertically and horizontally merged companies. In the past five years, every dominant pharmacy benefit manager—the intermediaries that pharmacists work with to get their reimbursements—merged with a dominant insurance company: Aetna/CVS, UnitedHealthcare/Optum, and Cigna/Express Scripts. For too long, these mergers have gone unchecked, giving these companies increasing power over independent pharmacies.
So what is the specific problem with the Change merge? On the pharmaceutical side of the merger, Change Healthcare’s eRx network contains an extraordinary amount of data that has both medical and pharmaceutical implications for insurance and healthcare utilization. It also contains sensitive information about UnitedHealthcare’s competitors. In pharma parlance, eRx is a “switch”: it holds data that provides a comprehensive view of patient health care claims, billing, payments and pharmacy interactions between nearly all insurers. It also contains competitive information about pharmacy benefit managers, insurers, patients and pharmacies that compete at various levels with the UnitedHealthcare vertical. Change’s eRx connects approximately 59,000 pharmacies and processes more than 1.5 billion claims transactions annually. It also processes millions of e-prescribing transactions per month by connecting pharmacy management service providers with pharmacy benefit managers.
History shows that UnitedHealthcare/Optum will use this information against its competitors to create unequal bargaining positions, target patients, reduce access, and increase consumer prices. Acquisitions like these should be opportunities to lower end prices for consumers. But as we’ve seen in healthcare acquisitions time and time again, the combined firms squander opportunities and crowd out competition, and consumer prices suffer as a result. Ask yourself: Are you now on a high-deductible plan? Does your employer pay more each year to insure you? Have your prescription drugs become less affordable? Are you having fewer choices about where to get your care or medicine? Do you need to fill your prescription at the pharmacy chosen by your insurer? For most of us, unfortunately, the answers are yes to all of the above.
All this is due to consolidation and the lack of accounting for the non-price effects of mergers. By gaining access to eRx, UnitedHealthcare will have access to: the data of its insurance competitors Aetna, Cigna, Anthem, Humana and Blue Cross Blue Shield; the data of PBM competitors CVS Caremark, Express Scripts, Ingenio, Humana Pharmacy Solutions and Prime Therapeutics; and data from retail and mail order pharmacies, including independent pharmacies. It will be a 360-degree view of the market that will allow them to target the patients who will make them the most money while excluding others.
UnitedHealthcare responded to the Justice Department lawsuit by saying it is ready to sell ClaimsXten, its claims payment solution for businesses. UnitedHealthcare also insists it has yet to misuse competitor data collected by OptumInsight, its existing claims payment solution. While selling ClaimsXten makes sense initially, what’s to stop UnitedHealth from buying it back a few years down the line, like what happens in so many transactions where the combined entity is asked to sell an asset? And what about independent community pharmacies that Optum doesn’t abuse data? Simply trusting that UnitedHealthcare is “Helping People Live Healthier Lives” does no good when its corporate practices abhor the system that is designed to keep people healthy.
We’ve heard promises many times from large, vertically integrated, dominant firms like UnitedHealthcare seeking to buy competitors. Yet health care seems to become more expensive and difficult to access every year. The Justice Department’s antitrust division, after many years, is finally doing the right thing by saying nothing more. We hope Judge Nichols follows suit.