More Pressure
Komoto said that he also lost business to CVS. And a benefit manager now owned by UnitedHealth Group Inc. told him that to stay in its network, he would need a broad-reaching accreditation that would have cost hundreds of thousands of dollars.

“Gradually we have been excluded from more and more PBM networks for specialty--and for no reason other than they wanted that market share,” Komoto said.

It wasn’t always this way. The specialty pharmacy business began to take off in the 1990s. In 1996, a Pittsburgh-area pharmacy landed an exclusive contract with Merck & Co. to distribute a breakthrough HIV drug then in short supply.

The pharmacy took a 37 percent markup, according to news reports at the time. Soon, specialty pharmacies were popping up everywhere, and big drug benefit managers gobbled up some of the most successful ones.

The markups are in the single digits now, Komoto said, but specialty pharmacies still get a spread on costly drugs, and may also get fees for their services or for selling data.

Market Concentration
The three largest pharmacy benefit managers -- CVS, Express Scripts and UnitedHealth -- control more than 70 percent of the PBM market, according to data from Drug Channels Institute, an industry research firm. They now also control more than half the $138 billion market for specialty drug prescriptions, according to the institute.

“It’s hard to imagine that the market could be less competitive than it is today,” said TJ Parker, founder of the online pharmacy startup PillPack, referring to the home delivery and mail-order services that are how most patients get specialty drugs.

Drug benefit managers also say that it’s their employer and insurance company clients that choose the exclusive arrangements, and they always have the option to include more pharmacies if they want.

Express Scripts’ two-story mail order pharmacy in an office park 20 miles north of Pittsburgh specializes in infused drugs for pulmonary hypertension and other rare diseases. It stocks almost $300 million of inventory, much of it inside a 100-foot-long walk-in refrigerator. The drugs inside can cost $125,000 per vial.

On the ground floor one recent February morning, dozens of technicians in short-sleeve shirts and khaki pants gathered infused drugs, syringes, tubes, drug pumps, and other supplies on rolling metal carts. Pharmacists checked the orders and packers wrapped them in gel packs and insulated boxes and send them on a conveyor belt to UPS trucks headed for the airport.