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Executive Summary

MEDICOST PHARMACY PPO WILL BE HEADED BY FORMER PCS EXEC IRA SHARENOW as president of the Southfield, Michigan-based pharmacy preferred provider organization (PPO). Sharenow has been with McKesson's PCS subsidiary for the last three years as VP and general manager. In a March 23 release announcing the appointment, Medicost noted that Sharenow, a pharmacist and an attorney, "served for several years with the Pharmaceutical Society of the State of New York [and] for a dozen years as an officer of Blue Cross and Blue Shield of Greater New York" before joining PCS. Medicost operates a prepaid prescription drug benefit service in Michigan as well as in Ohio and Indiana. Medicost's biggest customers include Ford and Chrysler. The pharmacy PPO said it hopes to expand its pharmacy PPO service to a nationwide level over the next few years. Medicost currently has contracts with roughly 600 pharmacies. The organization said it contracts with between 25-33% of pharmacies in a given locale, and attempts to enlist a representative mixture of independent, chain and supermarket pharmacies. The PPO operates on either a fee-for-service or capitated fee-per-customer basis. Medicost reportedly has about 300,000 subscribers who generate annual revenues of approximately $ 30 mil. In addition to the prescription drug benefit service, Medicost offers drug utilization review through an affiliated company, Health Information Design (HID), based in Arlington, Virginia. "With HID's state-of-the-art drug utilization system called DURbase in place, Medicost will offer clients service and savings through a combination of its unique pharmacy managed health care system and the DURbase capability to cut hospitalizations and overall health care costs by substantial reductions in drug induced illness," the company commented. Both Medicost, a three year-old company, and HID, a 17 year-old company, were acquired by Value Health in late 1987. Founded last May by venture capitalist Robert Patricelli with funding from Warburg, Pincus & Company, Value Health currently has about $ 50 mil. in annual revenues. The firm also owns National Foot Care Program, a podiatry PPO serving 250,000 members in Michigan, and American Psych Management, an Arlington, Virginia-based managed health care firm focusing on mental health and substance abuse.

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