Standalone Prescription Drug Plan Experience

[French]

My company (approximately 4,000 ees nationwide) is finally thinking about creating a healthcare strategy for the future. One possibility we are exploring is a standalone prescription plan. At present, our mail order program (for participants in our self-insured POS) is with one vendor and our retail program is with a different PBM through our TPA (an insurance carrier). We are also considering carving the prescriptions out of our 15+ HMO plans (about 50% of our employees are enrolled in HMOs) so it seemed natural to create a standalone plan. By having one vendor we would finally gain some control over the formularies, dispensing fees, co-payments (and/or co-insurance if we make that move), etc.

However we are having second thoughts now simply due to economics. If both the mail order and retail programs were serviced by the PBM of the TPA as part of our POS, would it make more sense than creating a standalone since the TPA undoubtedly has greater price leveraging power than us alone? I am just wondering if anyone else has experienced this issue and what the results were. Thanks.

[Guest Mary Anna T. McCoy, CEBS]

Sorry, stand alone is not the way to go. You are not large enough to have an advantage. Is the insurance company that is serving as your TPA and providing stoploss coverage a major or regional carrier? If a larger insurance company, they will have much more leverage with your retail and mail order pharmacy provider than you would on your on. They would be in the best position to provide that service for you on a on-going basis. Your managed care/care management function and pharmacy provider need to be working very closely together. There is an additional liability you would assume on the stand alone basis that is currently a portion of your insurance company/TPA's contract for services. I would stick with PCS/Scriptcare or other larger national providers and not attempt to negotiate on your own.

[mroberts]

I have to agree with Mary on this one. I have read so many reports about PBMs that have conflicting information on savings. Some reports even go as far to say that there aren't any. Perhaps if you're GM or UAL or a company of that size you can get some volume discounts, but even then I would think it's minimal. For example, there are several drugs currently on the market that do not have any competition. Why would the company that makes these prescriptions sell you these for less even if you were buying them in a large volume? It's not like you can go to another company and purchase a similar drug. And unfortunately, these are the drugs that are the most expensive.

[KIP KRAUS]

Just my opinion, but if we are to get prescription drug costs under control we are going to have to force consumers to make economic decisions about what drugs they are willing to pay for. Go back to the old 80/20 co-pay for all prescriptions and let the consumers decide if they want to buy the high price brands. To further their economic decision, only reimburse the cost of generics when generics are available and let the participants pay the difference if they decide to buy the brand names. If generics are not available of course you reimburse the cost of the brand name. This may force down the price of the brand names, but if it doesn’t it will surely reduce the employer’s costs.

[mroberts]

Good points Kip. Depending on how the drug plan is running, I may even take a little harsher view, like 60/40 or 50/50 cost sharing. Either way I agree that employees have to make good consumer decisions, especially when it can be as simple as asking if there is a generic available.

[French]

I appreciate all the comments.

This same question was asked of a local and a national consulting firm that we have worked with during the past few years and we received 2 distinctly different responses. One firm said that the PBM vendor market is extremely competitive today and that employers can reap the benefits by negotiating deep discounts, steep rebates and low admn costs. The other firm made many of the same comments as Mary Anna and mroberts did.

So we have decided to do 2 RFPs for prescription drugs - on a standalone basis and as part of rebid for TPA administration. Due to the anticipated increase in prescriptions, we plan on some major tweaking of our 3 tier copayment structure on the mail order program. And we have begun discussions on the design of a healthcare education program for our employees in an effort to address some of Kip's comments. Though we are too conservative a company at present to promote the defined contribution/consumer drive design, we do recognize the need to create awareness for our employees.

[Guest Dopinante]

French,

I know that is post is from a few months back. I can provide you with allot of data on a stand alone RX plan. If you are still intrested, let me know

[French]

Dopinante,

I would very much be interested in any data that you could provide. I have just sent out the RFP as part of the TPA rebid and expect to send out the Rx RFP by the end of July. Thanks.

[Guest Dopinante]

French,

I work as the Director of Sales for a PBM in NY. I have had some good experiance with carving out the Rx. The big question to see if it is worth your while is to compare what kind of deal that you have with the TPA to what you can get doing on your own.

I agree with one of the responses to this thread that sid the PBM industry is very competitive. I think you could get a good deal on your own.

I am out of the office for the next few days, but send me an e-mail and I can send you a few case studies

dopinante@nmhcrx.com

516-605-6679