Glaxo is under pressure to decide whether to run with the drug industry herd and risk losing a lot of money or to stand apart from the drug industry herd and risk losing a lot of money. Its instincts as a research-driven developer of prescription drugs lead it towards the second route. But the shifting balance of power within the US industry is driving it inexorably towards the first.
Like many of its rivals, the world's second largest drug company is faced with an immense challenge to its profits as the way in which corporate America buys its healthcare changes with frightening speed.
But as each of its competitors finds its own solution to that challenge, the options for Glaxo are narrowing.
The problem lies in the US, the world's biggest drug market. The past few years have seen a proliferation of pharmaceutical benefit managers - companies that manage the drug bills of employers who offer health insurance to their employees (see below).
PBMs, which already manage the drug needs of 50 million Americans, save their clients money by negotiating bulk discounts with drug companies and ensuring that patients use the cheapest possible product.
As such, they pose an enormous threat to drug company profits. They have acquired tremendous buying clout in a very short time. PBMs account for a quarter of all drugs sold in the US, a figure that could rise to 50 per cent within a few years.
Last November Merck, the world's largest drug company, decided that if it could not stop PBMs from eating into its margins it could at least buy a slice of their profits. It spent dollars 6.7bn on Medco, the biggest PBM and mail-order drug distributor, in a move that stunned the industry.
Analysts are divided on whether such vertical integration of manufacturer and distributor is the right way to go. It can easily fail - look at the fortunes lost by insurance companies and building societies when they bought up estate agencies, the high-street 'retail' end of their mortgage business.
Merck's move, however, upped the ante. Its rivals may have been undecided about the merits of vertical integration. But they were united in dreading a world in which buying decisions about their own products would ultimately be controlled by one of their rivals.
And they feared the competitive edge that Merck would gain by having access to the huge database of information about product effectiveness and cost provided by Medco.
The decision by SmithKline - the world's third-largest drug group - appears to put the seal on the agenda set by Merck. It has certainly put considerable pressure on Glaxo to act quickly if it is to follow suit. There are more than 100 PBMs in the US, but most are too small or regional to be of use to the big drug companies.
There are only half a dozen PBMs of any size; the biggest is Medco, now owned by Merck, while at least two others are spoken for - Diversified, which is being acquired by SmithKline, and Value Health, which has just signed a joint venture with US drug group Pfizer, which represents a halfway house to full integration.
That leaves one large PBM free: PCS, owned by McKesson Corp, America's biggest drug distributor. PCS is rumoured to be in talks with Glaxo; what is less clear is whether those talks involve an outright purchase or something more subtle.
With a pounds 2bn cash pile, Glaxo certainly could buy PCS - even though PBMs are growing so quickly that it would probably have to pay more than 50 times earnings to do so.
But Glaxo has been among the most sceptical of the outright purchase route. Its chief executive, Sir Richard Sykes, has argued coherently about the risks of vertical integration.
There is the concern that the loss of independence might undermine a PBM's client base, which could disappear in a very short space of time.
Why should clients trust a PBM owned by a drug company to offer them an objective service, after all? But if a drug company were to offer a completely objective PBM service, would that not defeat some of the purpose of buying it?
Then again, the trend in the healthcare management industry is towards 'capitation' - where the PBM offers to meet an employee's drug needs for a fixed cost per year. Such a path is fraught with danger, requiring the PBM to make actuarial- style judgements about the health of such employees.
All of which has so far led Glaxo to conclude that it is better off organising some form of alliance of drug companies, which would offer a range of complementary products to a PBM - and PCS might well be the most obvious choice.
An alliance of Glaxo's anti- ulcer products, with rival Wellcome's anti-virals, for instance, would be a powerful core to any theraputic menu - or 'formulary' as they are known.
This would give the drug- alliance companies access to the PBMs' databases, and also stop them from being squeezed out of the market altogether.
One such embryonic alliance - between Caremark International, a PBM, and drug groups Rhone-Poulenc Rorer, Bristol-Myers Squibb and Pfizer - has already been formed.
But alliances of drug groups are easier talked about than put together. If an alliance of companies offers a package of drugs - at a set price - to a PBM, then it must first decide how it shares out whatever profit is generated. And no drug group is likely to want to cede a better profit margin to any of its competitors than it receives itself.
Which is why Glaxo may prefer to buy a drug company with complementary products rather than form an alliance with its rivals. That was the logic behind last week's other big drug company acquisition: Roche, the Swiss drug manufacturer, bought Syntex, a US group, for dollars 5.3bn in a deal set to create the world's largest drug company.
Yet Glaxo is probably in a stronger position than any other company to tread a semi-independent path. It has some very promising new drugs with no obvious competitors - in particular its migraine drug. Where there are no competitors for a drug, a PBM is virtually forced to pay the price and include it on its formulary.
Glaxo also has a huge US sales force, which looks increasingly redundant. The sales people could be retrained to market a range of drugs at PBMs - Glaxo was, after all, one of the first companies to have staff dedicated to selling to PBMs.
Or the same employees could provide healthcare education to the members of healthcare plans.
But while Glaxo has not yet run out of options, it is beginning to run out of time.
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