Pharmacy Benefit Managers (PBMs) are wading through yet another controversy, this one pitting them against retail pharmacies, who claim that mandatory mail service is stifling competition or simply put, stealing away many of the pharmacies' customers. Mail-order prescriptions, however, have long been a cost-saving strategy promoted by PBMs and requested by their employer clients.
Pharmacy Benefit Managers (PBMs) are wading through yet another controversy, this one pitting them against retail pharmacies, who claim that mandatory mail service is stifling competition or simply put, stealing away many of the pharmacies' customers. Mail-order prescriptions, however, have long been a cost-saving strategy promoted by PBMs and requested by their employer clients.
In the last two years, the playing field has become a bit choppier with the advent of mandatory mail service, curtailing a retailer's role in drug fulfillment. Hewitt Associates estimates that 22% of employers will sponsor mandatory mail plans this year.
"Whoever is designing the pharmacy benefit-self-insured employers, health plans, PBMs-should have an opportunity to choose mandatory mail service," says Marissa Schlaifer, director of pharmacy affairs for the Academy of Managed Care Pharmacies (AMCP) headquartered in Alexandria, Va. Although the professional association of pharmacists has not taken a formal position on mandatory mail, Schlaifer says AMCP does not approve of any legislation that opposes it.
Which is just what Walgreens, CVS and Rite-Aid are doing. Late last year, Walgreens refused to do business with the State of Ohio, a decision that became effective on Jan. 1, affecting about 100,000 employees. Over a year ago, Walgreens announced that it would not enter into any new contracts with PBMs, who require employees to fill chronic disease medications exclusively through mail order, says Michael Polzin, spokesperson for Walgreens headquartered in Deerfield, Ill. CVS also dropped the state of Ohio employees, as well as employees of Toyota Motor Corp.
Although the State of Ohio adopted mandatory mail in 1992, it changed PBMs last year, opening the door for a new contract between Walgreens, Ohio and its new PBM, Express Scripts, based in St. Louis; however, Nan Neff, benefits administrator for Ohio, says the State is currently in the procurement process for a new PBM. Ohio employees are required to use Express Scripts' mail order facility after an initial prescription is filled at retail.
The projected annual cost for the state's employee prescriptions is $50 million with mail order accounting for about $38 million. Neff says that if all of the drugs filled by mail order had been procured at retail, pharmacy costs for the State of Ohio would have increased by $62 million.
"We did not hear about Walgreens' decision until we read its press release," says Neff, who is not too worried about employee access to other drugs, other than chronic ones, at retail. "We have found 98.9% of our employees have access to another provider within 1.5 miles of their homes," she says.
"As Hewitt and others have documented in surveys, a majority of employers are considering mandatory mail as an option," says George Van Antwerp, senior director of Rx Distribution for Express Scripts "For many employers, benefits are being put on the endangered list; they need to look at new options for managing their drug trend. The focus for years has been on drug mix and this will continue, but we are seeing more clients interested in managing their distribution channel."
TABLES ARE TURNED Although Walgreens was in the driver seat when it decided to drop business with the State of Ohio, the tables were turned with General Motors, when it withdrew its contract first. The pre-emptive move by GM, whose healthcare costs rose from $1.3 billion in 2003 to $1.5 billion in 2004, forestalled what the company expected Walgreens to do in light of its actions against Ohio. GM estimated that about 11% of GM's 1.1 million employees purchase their drugs exclusively from Walgreens.
Polzin says it is unfortunate that GM received the wrong information about its policy related to mandatory mail and that the two parties are in discussion about the future of their relationship.
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