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PHARMACY BENEFIT "CARVE-OUT" GAINS POPULARITY AS WAY FOR EMPLOYERS TO TEST MANAGED CARE; PRUDENTIAL EXEC SKEPTICAL OF MAIL- ORDER BUT EMPLOYERS DEMAND IT

Executive Summary

Employers are increasingly seeking to "carve out" a separate managed care pharmacy benefit from their traditional health coverage as a way to test managed care approaches, Prudential Insurance National Director of Pharmacy Operations Allan Zimmerman told the 42nd Annual Rutgers Pharmaceutical Conference May 12. Zimmerman predicted that "more and more employer groups will request pharmacy carve-out programs, taking pharmacy out of the medical management and managing it as a separate...entity." Prudential has been, "over the past several months, responding to pharmacy carve-out proposals and that clearly will be a trend, especially since a lot of the people we have within the Prudential health care system are [in] indemnity products. There's going to be a lot of demand from employers to kind of test those managed care waters" -- and "one of the first things they probably will try is the pharmacy." Prudential currently has about 20 mil. enrollees in traditional indemnity plans and 3.7 mil. in some type of managed care plan, up 1 mil. from the past year. One of the company's current "challenges" is to "try to transition those people in indemnity over to our managed care arenas as fast as possible," Zimmerman remarked. The managed care programs are located in 45 cities. In its group model HMOs, Prudential has established 70 in-house pharmacies, employing more than 150 pharmacists, he reported. On the corporate level, Prudential has established a pharmacy management unit, headed by Zimmerman. The unit includes managers of drug information and technology assessment; pharmacy operations; clinical pharmacy operations; and pharmaceutical industry contracting. Prudential's goal is to have "at least one pharmacist who's in each of our managed care cities" to aid with pharmacy management. Zimmerman stressed the importance of using a "multi-faceted strategy" for pharmacy management. "The most dangerous thing for pharmacy management right now are those unsophisticated" benefits managers or employers who are taking on responsibility for health coverage "and think that managing the pharmacy benefit is done in a single-dimensional term." One example is managers whose sole approach is establishing "a network of pharmacies and ratcheting down costs for the reimbursement for those pharmacies." Regarding strategies to address physician prescribing, Zimmerman commented: "There's a lot of competition in this area and nobody is really doing it really very well right now." Activities placed in this category include outcomes research and quality of life measures, drug utilization evaluation and use of formularies. "We have our own national P & T committee at Prudential," Zimmerman said. "In addition to that, our goal is to have individual city-specific pharmacy and therapeutics committees that can tailor our formularies to the individual needs of not only the members but the demands and characteristics of the provider groups in those cities as well." Regarding the design of pharmacy benefits, Zimmerman declared himself to be "an opponent of mail-order," but said many employers are demanding mail service pharmacy. Zimmerman said he believes that "the best way to deliver pharmacy services [is] with direct interaction face-to-face with the patient, either through retail or in-house pharmacy. The problem with mail-order, which is a thorn in my side at Prudential, is that it won't go away. Employer groups are hit over the head on a day-to-day basis by a lot of the mail-order vendors and they are convinced that mail-order is something that they need." As a result, Zimmerman said, "we are in the process of adding mail-order" to the list of available benefits, but "it will not be a great incentivized program." He said some employers have threatened to switch insurers if they cannot obtain mail-service pharmacy, although almost "invariably" the savings projections are less than the employers initially expect.
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