In Health Care, Not All Vertical Integration Is Created Equal

By David Fields, President and CEO, Navitus Health Solutions

The debate unfolding in state legislatures and Washington, D.C., over vertically integrated health care companies raises an important question: How much concentration is too much?

Lawmakers in Arkansas, Tennessee and elsewhere are responding to growing concerns that a handful of powerful conglomerates have become too dominant through vertical integration: owning insurers, pharmacy benefit managers (PBMs), pharmacies, physician groups and other critical parts of the health care system. The concern is that when one organization controls so many pieces of the patient journey, conflicts of interest can emerge that drive up costs, limit competition and reduce choice.

Our health care system shouldn’t reward companies simply because they can leverage their market power in decisions impacting patients’ lives. But as policymakers examine the role of vertical integration in health care, the problem is not integration itself. A ban on a model does not encourage efficiency, savings, improved health outcomes or access. It just bans a model. The problem is integration without choice, transparency and accountability.

A company’s business model must align its incentives with the interests of the patients, employers, unions, health plans and taxpayers who ultimately pay the bills. And we need to insist on transparency up and down the health care pipeline.

The Navitus PBM is the oldest of four health care businesses under common ownership of Navitus Health Solutions. These also include a specialty pharmacy, a specialty PBM and a supply-chain solutions company. Yet our model is fundamentally different from the one drawing scrutiny.

Our affiliated companies are not financially dependent on one another. They succeed by competing in their respective markets, not by requiring clients to use every part of the enterprise. And each independent piece of our system operates with transparency, showing who gets paid for what.

Clients who choose Navitus as their PBM are not obligated to use Lumicera Health Services as their specialty pharmacy. Clients who work with Lumicera are not required to use other affiliated businesses. Many clients do choose multiple services because they see value in coordinated solutions. But others do not. That choice is their own. It’s intentional on our part.

It creates accountability. It requires every business within our organization to earn trust on its own merits. And it helps ensure that integration serves clients rather than the other way around.

The distinction may seem subtle, but it matters enormously. A health care system should reward organizations that create value through service, outcomes and clarity. It should not reward organizations merely because they can exert market power across interconnected businesses.

For years, employers, labor organizations and other plan sponsors have demanded greater transparency from PBMs and other health care intermediaries. They want to understand where their dollars are spent. They want clarity around incentives. They want confidence that decisions are made for the benefit of patients rather than hidden profit centers.

Those demands are reasonable. In fact, they reflect exactly how competitive markets are supposed to function.

Transparency is ultimately a mechanism for accountability, and we need to insist on that for all players in the health care system. When clients can see how decisions are made and retain meaningful choice among providers, markets work better. Competition succeeds. Trust grows.

This is why policymakers should focus less on organizational charts and more on incentives.

If an integrated company can demonstrate that clients have real choices, that affiliated businesses compete fairly, that financial arrangements are transparent and that patients benefit from the model, then policymakers should welcome those outcomes.

On the other hand, if integration is used to limit competition, steer business through captive channels or obscure financial arrangements, scrutiny is warranted. Health care faces too many challenges — rising drug costs, affordability concerns, worsening chronic conditions and uneven access to care — for us to reduce this debate to simplistic conclusions.

As lawmakers examine the future of PBMs and broader health care consolidation, they should ask a simple question: Who benefits? If the answer is patients, employers and taxpayers, then integration is fulfilling its purpose. If the answer is only the enterprise itself, then policymakers are right to demand change.