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PCS/BLUES FEDERAL PHARMACY CONTRACT WILL YIELD $25 MIL. IN DRUG REBATE

Executive Summary

PCS/BLUES FEDERAL PHARMACY CONTRACT WILL YIELD $25 MIL. IN DRUG REBATE savings next year, the Blue Cross and Blue Shield Association estimates. The association announced July 15 that it has chosen Scottsdale, Ariz.-based PCS, Inc. to operate a preferred pharmacy network for the federal government employees and retirees who choose BC/BS as their health insurer. The Blues estimate that the PCS network will save at least $100 mil. in 1993 and that 25% of those savings will come from rebates. Other savings will come from the choice of preferred pharmacies, drug utilization review, incentives for use of generic products, and more "effective" claims management. Currently, 3.1 mil. individuals covered by the Federal Employees Health Benefits Program are enrolled in BC/BS, representing 41% of the overall federal program. BC/BS estimates that it will spend about $1 bil. in 1992 for prescription drugs. The contract will be PCS' largest, and PCS said it believes it to be the largest pharmacy management contract outside of some awarded by state Medicaid programs. The rebate program will be administered by a PCS subcontractor, Blue Cross and Blue Shield of Minnesota. The Minnesota group currently has rebate agreements with 26 pharmaceutical manufacturers. A PCS official said the rebate program operates as an "open invitation" to manufacturers, with rebates negotiated on the basis of utilization volume. Rebated products are placed on a "prescriber-driven formulary" of preferred products. PCS said that while prescribers will be encouraged to use those formulary items, there will be no financial incentives for either physician or patient tied to the choice of a particular drug product. Details of the Blues' multi-year contract with PCS are still being finalized and the agreement must also be reviewed by the federal Office of Personnel Management. The BC/BS association anticipates that the contract will be approved by OPM in August as part of the annual review of its benefits package. In November, federal employees have an "open season" to choose among the 400 or so insurance carriers approved by OPM. For those choosing the BC/BS plan, the pharmacy network will be implemented Jan. 1, 1993. PCS' pharmacy network includes 21,000 independent and chain pharmacies, or about one-third of retail pharmacies nationwide. Enrollees choosing the network pharmacies will pay a lower retail price or receive higher reimbursement or both. PCS said it has not been decided whether enrollees will be issued a PCS drug card. The specifics of the plan will be closely reviewed by pharmacy groups and members of Congress. The retail druggists group NARD has been concerned about how restrictive the choice of pharmacy will be and also about a provision in the original April BC/BS request for proposals that selected pharmacies be reimbursed at average wholesale price minus 15%. In a release on the program, PCS stressed that the contract "moves the community pharmacy firmly into the center of effective managed drug care," due to pharmacies' role in DUR and other "key elements" of the program. The House Appropriations Committee has requested further information from OPM on how the plan would affect accessibility to pharmacy services, particularly for rural residents, and "whether this proposal will result in actual net savings" for the federal government or for federal employees and retirees. The request is in the committee's report on its FY 1993 Treasury, Postal Service, and General Government appropriations bill.

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