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DRUG BENEFIT COSTS FOR CORPORATE RETIREES CAN BE CUT 40% UNDER SENIOR Rx PLAN, UHC SAYS: GERIATRIC FORMULARY OFFERS REBATED PRICES ON COVERED PRODUCTS

Executive Summary

United HealthCare's Diversified Pharmaceutical Services subsidiary is beginning to market a specialized, drug benefit program with a tailored formulary of over 400 products for the elderly. DPS maintains that it already has "negotiated significant volume purchase rebates with pharmaceutical manufacturers, covering approximately 80%" of patented prescription drugs. The pharmaceutical benefit management firm maintains that its elderly program can save drug benefit plans covering corporate retirees "as much as 40%" on the costs of that part of the health benefit. "Diversified Senior Rx allows you to save as much as 40% off your current prescription program costs for retirees," a DPS promotion asserts. The drug card plan obtains savings "through close monitoring of prescriptions for appropriate use and through substantial pharmacy discounts and contracted manufacturers' rebates." Program features for retirees, DPS said, include a formulary that reimburses for drug products most commonly used by the elderly and a national network of "over 25,000" participating pharmacies. DPS offers a mail-order pharmacy service through contracts "with all the major mail-order vendors." The mail-order part of the contract is presumably one of the outgrowths of the discussions between DPS and Medco Containment Services that culminated in a "non-exclusive joint marketing agreement" last July ("The Pink Sheet" July 13, 1992, T&G-1). A point-of-sale computer system incorporated in the program makes "over 200 edits (checks)" of the validity of the claim and the appropriateness of the prescription "within eight seconds," DPS claims. The point-of-sale system also indicates whether generic substitution is permitted and designates the amount to be paid by the beneficiary. Pharmacy reimbursement is set at the lowest of AWP minus 10%, the MAC price (when available) or the pharmacy's usual and customary price. Participating pharmacies also agree to accept a lower than average dispensing fee: $2.00-$2.25, compared to the national average of $4.50. Supplier cost reductions are obtained through rebates on the formulary products. DPS claims that it can obtain manufacturer rebates through its formulary bidding "that cannot be achieved through any other means" on the cost of "expensive, single-source brandname drugs." The formulary was developed by a national pharmacy and therapeutics committee and a panel of gerontologists. A booklet of prescribing guidelines based on the formulary, is provided to beneficiaries so that they can present it to their physicians. The booklet lists formulary drugs with costs comparisons relative to therapeutic alternatives. DPS recommends that formularies be left voluntary when first implemented so that patients and physicians can become acclimated to the process; the company suggests making the formularies restricted or mandatory over time. In addition, the plan saves on administrative costs through electronic claims processing, DPS said. The on-line system checks for duplicate prescriptions and drug interactions and allows for drug utilization review (DUR), which DPS maintained "can save as much as 10%" on pharmaceutical benefit costs. The company said it also acts as a single vendor accountable for all services including DUR, mail delivery, formulary development and rebates. General formulary and formulary-development programs were introduced last year by two other pharmacy benefit administration companies: PCS and Perform ("The Pink Sheet" March 23, 1992, T&G- 8).
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