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MEDCO TO PROVIDE MAIL-ORDER PRESCRIPTIONS TO NEW YORK MEDICAID

Executive Summary

MEDCO TO PROVIDE MAIL-ORDER PRESCRIPTIONS TO NEW YORK MEDICAID patients outside of New York City under an arrangement announced Dec. 6 by Medco Containment Chairman and CEO Martin Wygod. "New York will be the first state to use mail service...under Medicaid," Wygod said. An agreement-in-principle has been reached. The deal is expected to be finalized so that the program can begin this spring. The New York State Department of Social Services selected Medco's Albany-based mail-service facility to offer prescription drugs as part of a voluntary program for all Medicaid recipients outside of New York City. The state's Request For Proposal (RFP) for mail-order prescription service identifies the program as "an option" for "all drugs identified by the Department as long-term maintenance drugs" with the exception of controlled substances requiring triplicate prescriptions. New York has a pending amendment to increase the categories of drugs considered "long-term maintenance," and expects Medco to provide those as well, the RFP indicated. Medco won the contract in a bidding process. New York reportedly expects to save 25%-30% on prescriptions filled by mail. Medco will receive an undisclosed fee on a per-order basis. The RFP capped that per order fee at $2.60. Medco states that over 500,000 households receive Medicaid in New York's 57 counties outside New York City. According to the RFP, "there is no guarantee of a minimum level of volume or participation by Medicaid recipients." Initially, there will be no incentive for patients to choose mail-order service. New York's RFP stresses that "the success of the program will be heavily dependent on the marketing design." Medco Senior Exec VP James Manning stated that the company and the New York state Medicaid department "are designing a marketing program right now." There are also ongoing negotiations about patient eligibility, Manning reported. In order to meet increased demand, Medco anticpates building a new Albany pharmacy to replace its existing one. The new facility will be twice as large as the existing one, approximately 40,000 square feet, and will have twice as many employees, about 300. It will be ready to handle 50,000 prescriptions per week, Manning estimated.

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