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EXPRESS SCRIPTS PROJECTS 3 MIL. MEMBERS IN "ACTIVELY MANAGED FORMULARIES"

Executive Summary

EXPRESS SCRIPTS PROJECTS 3 MIL. MEMBERS IN "ACTIVELY MANAGED FORMULARIES" by the end of 1993, the pharmacy benefit management company told analysts at an Oct. 25 session of the Montgomery Securities Health Care Conference in New York City. Express Scripts currently manages pharmacy benefits for more than 3.8 mil. members, of whom more than 2 mil. are part of a formulary plan. In addition to increasing the number of participants in formularies, the company has seen its clients move toward "more and more restrictive formularies and stronger enforcements of formularies," Express Scripts President Barrett Toan said. Express Scripts also believes there is a growing acceptance of managed care formularies by pharmaceutical manufacturers. Drug companies are increasingly pursuing Express Scripts "to help them promote their products in ways which the detail force cannot," Toan said. Express Scripts has contracts with approximately 35 manufacturers and has "rigorously tried not to add additional manufacturers" to its rebate programs, Toan said. The company is trying to limit its coverage to half of the top 100 drugs to ensure that the manufacturers benefit from the "volume-based discounts and the value-added services of the rebates." Discount pricing contributes about half of the estimated 25% reduction in prescription costs produced by Express Scripts management plans. The other components producing the savings are drug utilization review, which contributes 35%, and the "plan design" (15%). The use of formularies to manage prescription benefits may be supplemented in the future by other services that Express Scripts hopes to provide through the integration of its pharmacy data with medical data collected by several of its large clients. There is a growing demand for the development of "protocols for the use of pharmaceuticals for HMOs and employer groups" based on the "integration of medical and pharmacy data" to which Express Scripts has access, Toan said. Express Scripts also sees an opportunity to use its data base to provide "economic analyses to show the cost benefits of certain therapy regimens." Although the St. Louis-based company originated as a mail- service provider, only 9% of its total volume ($56.2 mil. for the first six months of 1993) is from the mail-order segment; 82% of the firm's revenues come from "complete pharmacy benefit management service," which includes a network of 32,000 pharmacies, or 54% of all retail pharmacies in the U.S. The balance of sales are produced by a home infusion business and a managed vision program. A major advantage of mail-order is "that there are probably two days when you can call the physician and try to change the order without significantly impairing the turnaround time perceived by the patient," Toan noted. Express Scripts' mail- service business calls on 30% of all scripts written to ask for some form of substitution. "We actually change 10% of the therapies involved and receive a total of 11% savings on all prescriptions" that go through the mail-order pharmacy; the company also converts around 90% of all potential generic fill opportunities. Approximately 15% of scripts filled by the retail pharmacy network are reviewed for possible changes, according to the company's 1992 annual report. Express Scripts' client base includes six HMOs and 20 HMO plans representing 2.1 mil. members, or 52% of the company's covered lives. "Large groups" account for 33% of the company's membership; it has added 1 mil. commercial members within the last 12 months and over 1 mil. HMO members. New clients include FHP, a 750,000-member West Coast HMO, and Maxicare. A second mail-service and claims processing facility will open in Phoenix in November. Revenues were up by 76.7% for the first six months of 1993 compared to the 1992 first half, while profits rose 82% to $3.5 mil. Express Scripts went public in June 1992 with a 2 mil. share offering. The company was founded in 1986 as a joint venture between a regional drug store chain, Medicare-Glaser, and an HMO owner-manager, The Sanus (now a division of New York Life), which bought the remaining interest from Medicare-Glaser in 1989.
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