Wednesday, October 26, 2011

When is a pill not a pill?

Well, according to Walgreen's, "[o]ur product is not a pill; our product is a health outcome."

How nice for you.

To understand what's happened, let's revisit the Pharmacy Benefits Manager (PBM) model:

"PBM's are (allegedly) a cost-efficient way for carriers to offload the administrative functions of filling prescriptions ... The stated reason for this business model is that it helps carriers to rein in the cost of medications, which make up a disproportionate percentage of claims."

So far, so good, In this case, the PBM is Express Scripts, and their supplier is the friendly neighborhood Walgreen's pharmacist. The latter has decided to enhance its service offering by helping customers manage their own prescriptions. This makes some sense: in theory, the pharmacist knows about the patient's meds and any interaction issues. He (or, of course, she) is often a trusted member of one's health care delivery team.

The problem is that this "enhanced" service isn't free, so Walgreen's is nudging Express Scripts (the PBM) to up their reimbursement rate.

Sound complicated?

It is, but only because we (theoretically) value that extra step on the pharmacist's part. In this case, "Express Scripts' members account for about 90 million of the prescriptions Walgreen fills each year;" that's a lot of pills (and ointments, etc). If the two parties can't reach an agreement, then a lot of current Walgreen's customers will soon be former Walgreen's customers. And it's not like there aren't other options: with a CVS on what seems like every corner, not to mention K-Mart and WalMart and Target all vying for a piece of that rather large (and lucrative) pie, Walgreen's may end up with a rather severe headache.

Is there a pill for that?

[Hat Tip: FoIB Holly R]
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