CVS Caremark has named Per Lofberg as head of its pharmacy benefit management business, effective Jan. 4, 2010. Let’s take it from the top.
Lofberg, 62, is co-founder and chief executive of genetic testing company Generation Health, an organization that CVS took a minority stake in last month. The same day CVS announced Lofberg’s appointment, the company also said it was increasing its stake in Generation Health. (There must not be any connection between the two announcements because they were made in separate CVS press releases).
Lofberg is a former top executive of leading PBM Medco and later chairman of Merck-Medco Managed Care, the wholly owned unit that drug maker Merck formed after its acquisition of Medco in 1993. That ill-fated merger — which struggled with various conflicts of interest — resulted in Merck spinning off Medco in 2003. This happened about three years after Lofberg had already left the PBM unit to head up Merck Capital Ventures.
The structure of the spin-off left the new entity, Medco Health Solutions, holding the bag (Merck came out smelling like roses). But Medco’s new management team led by David Snow was able to right the ship — and enjoy tremendous success — in part because as onerous as Medco’s separation agreement was with Merck, at least the two companies were separate. Medco could eventually move on, and it did.
I have no doubt Lofberg knows a thing or two about PBMs. But let’s be clear. The issue here isn’t management per se. The issue is the lack of synergy and the channel conflicts between a PBM and a drugstore chain, in the same way the issue for Merck-Medco was the conflict of interest inherent in the merger of a drug company (which makes its money selling drugs) and a PBM (which is supposed to make its money helping manage drug costs).
Merck-Medco, which Lofberg headed for seven years, still ended up a bad marriage. Why should we think CVS Caremark with Lofberg running the PBM operation will be any different?
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It seems like you have a chip on your shoulder relative to CVS Caremark. After working in a PBM, I think the combined model has a lot of promise.
Have you met Per? The PBM world pre-2004 was very different. I don’t know him, but I would be hesitant to blame him. Medco has been a well run company with lots of success for years.
As my posts indicate, I just don’t believe in the combined PBM-drug company or PBM-drugstore model — and history continues to back me up. The chronology above doesn’t “blame” Lofberg for anything. He may be the best PBM manager in the world, but that’s not the point. The question is can anybody “manage” around the inherent conflicts in the combined model? I say no, but I suppose we shall see.