Picture a stack of $1 bills that reaches up to the International Space Station and then extends into space another 17,000 miles. The amount of money in that stack, $259 billion, is what the federal government says Americans spent on pharmaceuticals in 2010.

That mental picture can also help us understand why pharmacy benefits management, or PBM, has become such a big business. The goal of PBMs is to keep that stack of dollars from reaching the moon. Which PBM could emerge as the biggest winner in this booming industry? Let's take a look. 

Contenders
Just four PBMs generate 65% of the industry's revenue. Express Scripts (ESRX) stands as the largest of the group. CVS Caremark (CVS -0.83%) comes in second, with UnitedHealth Group's (UNH 1.44%) OptumRx and Catamaran (CTRX.DL) taking the next two positions.

Sources: Company 10Q and 8K SEC filings.

Two of the four companies grew this year as a result of acquisitions. Express Scripts closed its acquisition of former big three PBM Medco in April. Catamaran was formed in July after SXC Health Solutions bought rival Catalyst Health Solutions.

Generics
One major key to winning in the PBM market is increasing use of generic drugs. PBMs that can effectively steer patients to using generics instead of brand drugs can greatly reduce costs for customers. Increasing generic use is a top priority for all of our big four. Which company is doing the best in this regard?

Sources: Company 10Q and 8K SEC filings.

The companies' generic usage rates rank in opposite order of revenue size. Catamaran leads the way in encouraging use of generics. However, all of the leading PBMs improved generic usage compared with 2011. This is due in large part to the greater number of generic drugs now on the market.

Mail delivery
Another important way that PBMs hold down drug costs is by increasing the number of patients who receive drugs via mail delivery rather than through retail pharmacies. The PBMs that can negotiate deeper discounts for these drugs delivered by mail directly to patients' homes will be more attractive to customers.

With the Medco acquisition, Express Scripts gained the largest mail-order pharmacy in the U.S. In 2011, as Medco's mail-order business filled 113 million prescriptions. The economies of scale inherent with this large operation give Express Scripts an edge in this increasingly important channel of controlling drug costs.

CVS Caremark also has a significant mail delivery operation. The company reported nearly 71 million mail-order prescriptions filled in 2011. It's on track to easily exceed that volume in 2012.

While OptumRx hasn't shared details about its volume for mail delivery, the company has been busy beefing up its capabilities. The business unit of UnitedHealth announced an expansion of its Overland Park mail processing facility in late 2011. 

Catamaran also doesn't break out its mail-order prescriptions. Like OptumRx, though, the company has focused on the mail delivery side of its business. Catamaran bought PTRX, its exclusive mail-order pharmacy provider, in October 2011.

Specialty drugs
Controlling the costs of specialty drugs is also critical. Spending on specialty medications increased nearly 23% in the first nine months of 2012, according to Express Scripts.Costs for drugs to treat rheumatoid arthritis and autoimmune conditions, multiple sclerosis, and cancer made up two-thirds of specialty drug spending.

Not surprisingly, all of the major PBMs have specialty pharmacy units. However, controlling the costs of specialty drugs probably presents the most difficult challenge for the companies. Because there are usually few drugs within a given therapeutic area, the drug companies have more pricing power for specialty drugs than they do for traditional brand drugs.

The ability to bring volume to the table still matters, though. Therefore, the advantage in this key area probably goes to Express Scripts and OptumRx. As the largest PBM, Express Scripts could be able to negotiate better prices more effectively than smaller PBMs. However, OptumRx is part of UnitedHealth, and its leverage as the nation's largest insurer could also enable it to obtain better pricing. 

And the winner is ...
All of the large PBMs should do well over the long run. If I had to select only one, though, my pick would be Express Scripts. Its scale should enable the company to drive more patients to using generics and mail delivery as well as negotiate better deals with the drug companies. Express Scripts also has the most attractive valuation based on P/E-to-growth ratios.

The Congressional Budget Office estimates that PBMs save as much as 30% in total drug spending. Ultimately, those savings result in your spending less on prescription drugs and less than you would otherwise have to spend on taxes to support government health programs. Therefore, the real winner of the "PBM wars" just might be you.