Prescription Drugs - Medicine & Money

The truth about prescription drug costs.

Drug Dangers

[Send this Page]

Debate heats up over mail-order versus retail drugs

Tom Anderson - Employee Benefit News • August 2005

Rising drug expenses are prompting more employers to consider limiting their retail pharmacy network to low-cost providers or cutting out retail pharmacies from prescribing non-emergency medication altogether.

General Motors, the nation's largest private purchaser of health care, has saved $80 million using a mandatory mail-order program, claims Medco Health Solutions, the automaker's pharmacy benefit manager.

Since 2004, GM employees and retirees have had to use mail-order for prescription of maintenance drugs for long-term treatment of chronic conditions such as diabetes, high blood pressure and asthma. Members and their families pay only a $9 co-pay for a 90-day supply of the drugs through mail-order. If they want to opt out of mail-order and go to a retail pharmacy, members pay the full cost of the drug at the company's discount rate.

GM received "relatively little noise from its members," even though some needed to change their drug-buying behavior as a result of the switch, says Medco spokesman Jeff Simek.

In total, Medco clients spend about 35% in mail-order pharmacies and 65% in retail pharmacies, explains Simek. This reflects real-world practices today: Most employers use a combination of mail-order and retail pharmacy networks, with the mail-order pharmacies handling maintenance medications.

Mail-order pharmacies usually save employers money on maintenance prescriptions because these firms have lower overhead expenses than their retail counterparts. Simek is quick to point out that mail-order and retail pharmacies have complimentary strengths. "Mail-order pharmacies don't take anything away from retail," he says. "The pie for everyone will continue to grow."

Mail-order versus retail

However, Walgreens, which was cut from GM's retail pharmacy network in March, doesn't exactly see it that way. The pharmacy retailer says filling prescriptions in retail stores actually may save more money than a mail-order plan would.

The pharmacy retailer found that its PBM's 18-month-old Advantage90 pharmacy management program, which allows employees to fill 90-day maintenance prescriptions via mail order and at retail outlets, provides more savings than a mandatory mail-order plan does. For companies who have been offering Advantage90 for at least a year, the average retail prescription filled under the plan was more than $10 less than a 90-day mail-order prescription. Moreover, Walgreens executives say, these employers saw a 2% reduction in prescription drug costs, with a per-member-per-year savings of $9.

Walgreens Health Initiatives President Greg Wasson explains the savings by pointing to the importance of face-to-face interaction with the pharmacist. Many people, he explains, do not necessarily want to order their drugs through the mail but would rather be able to talk to the pharmacist. What is more, he claims that face-to-face interaction leads to more utilization of generic drugs than mail-order does.

More than 26,000 pharmacies nationwide, including the nation's largest pharmacy chains, participate in the Advantage90 program. "For employers and managed care organizations who share our philosophy that mandatory mail order programs are not in the best interests of patients, Advantage90 is the solution," Wasson says.

Medco finds that more employers are drawn to mandatory mail-order. In 2003, Medco had 2.2 million lives covered by mandatory mail-order programs. That figure has nearly tripled to 6.4 million lives in the first quarter of 2005. Simek says that mandatory-mail still represents roughly 10% of its clients' pharmacy benefit designs. A pharmacy benefit manager "can't thrive as just a mail-order business," he notes.

A Hewitt Associates survey last year showed that 22% of large employers had a mandatory mail-order program in place and 51% were considering it last year.

Express Scripts, a large pharmacy benefit manager, says mandatory mail-order plans, which the company calls "exclusive home delivery," can help employers lower costs. By using mail-order plans and other cost-management programs, prescription drug spending was flat last year for its customers, the company reports.

Mandatory mail-order programs increase home-delivery use by at least 25 percentage points, an Express Scripts study of its clients found. About 70% of all prescriptions could be filled by mail-order pharmacies, says George Van Antwerp, senior director, plan design and formulary at Express Scripts.

Van Antwerp points out it's important for employers understand that mail-order programs are for patients that have established the appropriate level of maintenance medications.

Reining in retailers

While mandatory mail-order programs will appeal to employers who want to take drastic steps to keep their drugs costs under control, many companies are interested in taking the more moderate step of limiting their retail network to drive cost savings, Van Antwerp says.

Not all retail pharmacies are created equal. Some are more successful at convincing their customers to switch from brand name prescriptions to lower cost generic drugs. Employers can save money by limiting a retail network to pharmacies with high generic prescription rates.

Express Scripts has launched a program in June that will do just that. Van Antwerp maintains that retailers are eager to participate in limited networks because this helps them demonstrate to employers that they can lower drug costs. Retailers would be judged on such factors as how often they switch users to generic drugs.

A notable change in retail pharmacy networks is likely to be seen after Jan. 1, when employers start to limit their retail pharmacy network to the "low-cost providers," Van Antwerp explains. Express Scripts has received interest from its largest clients in implementing a limited retail pharmacy network program in 2006, he says. Right now, the company is helping employers model how their drug costs would change by switching to a limited network. - T.A.

About Us
Disclaimer
Sitemap