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PCS PHARMACY MANAGED CARE PROGRAM SETS PAYMENT AT AWP MINUS 10%

Executive Summary

PCS PHARMACY MANAGED CARE PROGRAM SETS PAYMENT AT AWP MINUS 10% or the pharmacy's usual and customary retail price -- whichever is lower. PCS explained its payment structure in a proposed contract and managed care program information sent to the 52,000 pharmacies currently participating in the PCS RECAP electronic claims submission and adjudication network. PCS is gearing up to offer the managed care program to its health insurance plan clients on Jan. 1, 1993. A program summary prepared for pharmacies explains: "In most cases, a client's participation in a Managed Care Program with PCS will prevent a switch to other competitors' programs [that have] lower reimbursement, restricted pharmacy networks and a bias to mailorder alternatives." The pharmacist "plays an important role in ensuring the success of many managed care programs," the PCS summary states. "However, to succeed in establishing a reimbursement that is both fair and equitable to all, the parties must recognize standards that have been established in today's marketplace by a competitive focus on ingredient cost, without regard to delivery of quality of care. Because so many payers are now aware of the discounts on drug purchases which are widely available," PCS added, "they have changed the reimbursement from full average wholesale price to 90% AWP, and often less." The summary advises that "more than 40% of PCS's clients use this type of reimbursement; in the near future, we expect as many as 80% of our membership base to demand coverage through a 90% AWP network." The Scottsdale, Ariz.-based subsidiary of McKesson handles prescription drug benefits for 20 mil. individuals. It has just announced its largest contract, managing drug claims for more than 3 mil. federal government employees and retirees who choose Blue Cross and Blue Shield plans for their health insurance ("The Pink Sheet" July 20, T&G-2). The federal contract, also slated to be up and running Jan. 1, includes a preferred provider network of 21,000 pharmacies. PCS is trying to position the Managed Care Program as an "acceptable alternative" to other programs that generate savings primarily through cutting pharmacy retail payments. When fully implemented, the managed care project will include other "program enhancements" designed to promote "cost effective, quality programs," including "enhanced" drug utilization review, strengthened generic substitution and a formulary program. For maintenance drugs, the plan sponsor may choose to direct patients to a "community pharmacist who is able to compete with mail-order programs because of extended days supply and incremental dispensing fees," PCS said. Specific elements of the Managed Care Program can be tailored to individual clients. For some of its clients, PCS currently bases its formularies in part on provision of manufacturer rebates. The PCS summary for pharmacists stresses that participation in "formulary programs [does] not reduce pharmacy reimbursement." PCS is also considering "potentially higher reimbursement for pharmacists who demonstrate superior capability in managing care by providing interventions that improve quality in a cost- effective manner." While details of this proposal are yet to be worked out, a PCS spokesperson said that, for example, a pharmacy might receive financial rewards if it helped hold down a plan's health care costs by monitoring compliance with drug regimens. In some cases, pharmacies may have to upgrade their computer capabilities to participate in the Managed Care Program.

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