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PCS MANAGED CARE PROGRAM WILL PAY PHARMACIES FOR GENERIC, THERAPEUTIC (WITH MD CLEARANCE) SUBSTITUTION; PCS OPENS FEDERAL Rx BENEFIT TO LARGER PHARMACY PANEL

Executive Summary

PCS is planning to launch a managed care program that will pay retail pharmacies for generic substitution and for persuading prescribers to change nonformulary prescriptions to orders for drug products on management company's formulary. President Robert Johnson unveiled the program, which will be formally announced by December, to the National Council of State Pharmaceutical Association Executives at its Oct. 23-24 meeting ("The Pink Sheet" Nov. 1, p. 6). It appears that the PCS plan will resemble the "coordinated care network" plan announced by Medco Containment subsidiary PAID Prescriptions in September. The PAID program also includes pharmacy payments for generic substitution and for obtaining physician consent for therapeutic substitution ("The Pink Sheet" Sept. 27, p. 7). The American Pharmaceutical Association risked criticism among the pharmacy community by endorsing the PAID program despite PAID's affiliation with Medco and its mail-service pharmacy business. APhA Exec VP John Gans acknowledged the risk at the time but pointed out that the association's agreement to work with PAID was nonexclusive and could be replicated with other drug claims management firms. He also noted that no other management company was willing to pay pharmacy for services beyond a dispensing fee. The APhA CEO is one of several national pharmacy leaders who sit on the PCS pharmacy advisory committee, established in 1990. PCS is a subsidiary of McKesson. PCS' new managed care program has been in development for several months and is based in part on pilot studies in Connecticut, West Virginia and Pennsylvania. In the interim, PCS has increased the number of plan beneficiaries using its formulary, Premier Rx, to 22 mil., up from 7 mil. a year ago, when it was launched. The pilot studies included all pharmacies in the PCS network in Connecticut, most of West Virginia and southeast Pennsylvania. The studies were limited to prescriptions for all employees of a single-client company located in the three areas. The pharmacies were paid to counsel the patients, to respond to drug utilization review alerts and to dispense generic products whenever possible. Fees for counseling were paid on a $60-per- hour basis. The pilot programs were completed in April 1992. Premier Rx was launched in April 1992 as a list of more than 1,100 prescription drug products developed and updated quarterly. PCS negotiates price rebates from manufacturers in exchange for inclusion of their products on the formulary. The formulary was developed with Minnesota Blue Cross/Blue Shield, and the first PCS client to use the product was the Maryland State Employee Benefit Program. Since the formulary was first marketed, PCS has urged pharmacists to try to contact prescribers when presented with an order for a nonformulary product for which there are formulary alternatives. One lesson that PCS brought away from the pilot projects is that pharmacists are not willing to try to persuade physicians to change their prescriptions for an additional fee of just 500 or $1. Minimal payments are not worth the effort of jawboning physicians, a Pennsylvania pharmacy representative explained. The company will disclose the program's revised payment levels when it formally announces the managed care program. PAID's reimbursement amounts are expected to be in the $4-$7 range for therapeutic substitution plus 20% of savings from the generic switch. PAID's coordinated care network program is scheduled to begin Jan. 1. Enrollment of pharmacists began early this autumn, and PAID expected to have more than half of its pharmacy clients signed on within nine months. The payments to pharmacies for generic and therapeutic substitution will begin during the first of PAID's two-stage program. During the second stage, scheduled to begin in April 1994, the plan will establish training programs to coach pharmacists in patient counseling, improving drug therapy outcomes through monitoring services and communicating with prescribers. The training programs will be conducted through the American Pharmaceutical Association, with continuing education credits available; development of materials is funded by PAID. Regardless of the size of the pharmacist payments, NARD and the National Association of Chain Drug Stores publicly have looked askance at managed care company programs. Charles West, exec VP of the independent pharmacist group, and NACDS President Ron Ziegler have maintained that such programs constitute a taking of pharmacy assets by "middlemen" ("The Pink Sheet" Oct. 4, p. 8). Pharmacy retailers want to establish buying groups that purchase products from manufacturers at bid prices, leaving claims adjudication and reimbursement to management companies. Retailers say that additional small fee payments from managed care firms do not adequately compensate pharmacies for continuing to pay high acquisition prices, while management companies obtain manufacturer rebates by establishing formularies and squeeze pharmacy reimbursements. The difficulty for pharmacy retailers will be in convincing payers and manufacturers that they can effectively shift market share. Johnson also described to the state pharmacy association execs the opening of PCS' federal employee prescription program. PCS, which manages the drug benefit of the federal government's health care program, said its opening of the program to any pharmacy willing to accept payment terms has added 6,000 locations to the earlier total of 30,625 pharmacies enrolled in the network. The new total of 37,000 network pharmacies represents about 65% of all community pharmacies nationwide. The remaining 35% presumably comprise those unwilling to meet terms of the contract, which calls for payment at the lower of the lowest retail prescription price among area pharmacies or the national contract price. PCS also indicates all pharmacies in the network will be on-line as of Jan. 1, 1994, ending the need to process paper claims.
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