Well, I can’t resist pointing out that my January post Wal-Mart's PBM Game Plan predicted Wal-Mart’s strategy. Give the post another read because the economic logic is still generally accurate, plus there is a good discussion in the comments below the post.
HERE COME RESTRICTED NETWORKS
Note that Wal-Mart is not giving these drugs away, despite the Reuter’s statement that Wal-Mart “will fill certain generic drugs for free.” Only the co-pay for beneficiaries is $0 -- the same as your Drug Channels subscription fee. Caterpillar’s health plan still pays for the drugs, but now negotiates directly with Wal-Mart rather than using a PBM intermediary.
This is precisely the “restricted network” trade-off that I described in my January post:
- Give your beneficiaries freedom of pharmacy choice and pay $X for drugs.
- Restrict choice to a more efficient channel, e.g., Wal-Mart pharmacies, and pay less than $X.
Restricting the network to Wal-Mart pharmacies won’t work in many geographies, limiting the impact on urban/suburban chain pharmacies such as Walgreens (
WAG) or Rite-Aid ( RAD). However, there are 12 Wal-Mart stores near the , headquarters of Caterpillar, making it a more realistic option. View a map of WMT stores in Peoria. See Walgreens’ $4.33 Surrender to Wal-Mart for more on the retail pharmacy impact of Wal-Mart. Peoria, IL
As I see it, the deal does not represent a direct frontal assault on PBMs such as Express Scripts (
ESRX) or Medco Health Solutions (MHS). Instead, Wal-Mart is subtly undermining the PBM’s economic model, which is overly dependent on margins from generic drugs by mail. Wal-Mart’s program highlights these “excess” margins by offering an alternative channel choice.
I’m more intrigued by the competitive comparison with
CVS Caremark ( CVS). Many of CVS Caremark's new benefit options try to create channel neutral choices (my terminology) within a restricted retail network. For example, Maintenance Choice is their drug benefit option that lets patients choose a 90-day supply from mail order or a local CVS retail outlet at the same cost or co-pay.
Final thought: The economics of the branded drug supply chain make it essentially impossible for Wal-Mart to offer the same deal for drugs with marketing exclusivity – for now. I expect that barrier to fall within the next few years.
Good for Wal-Mart and good for consumers! Restricted to Wally World is no different than restricting my choices of doctors/dentists or drugs themselves. I'm liking $0 co-pay. Besides, the whole healthcare industry is whacked. Meds, taken as prescribed LOWER healthcare costs yet virtually all plans have built in tiers/co-pays that almost beg you to not take meds, which means more doctor visits, more hospital visits. Remove those barriers and healthcare costs goes down.ReplyDelete
Bully for CAT and bully for Wal-Mart.
I'm getting even more convinced that there will be a special place in hell for Wal-Mart. I don't know how it works in Illinois, but at least in my state restricted networks are illegal, so this deal would not apply to any CAT beneficiaries in my state! What I really would like to know.. none of us will ever find out, I'm sure.. is how much Wally will get paid directly from CAT for these generics with the ZERO copay. In other words, will they get the $4 rate, or more, or less??ReplyDelete
And since you brought up CVS/Caremark.. I think it's bullshit that they would not allow me to fill prescriptions for my customer, who requires having their medications specially organized in blister pack packages, because he's part of a retiree benefit program with Caremark. They refused to make any overide or exception for him, even with phone calls from me, the Visiting Nurse, and his Doctor. Well guess what? It won't be long before he ends up in a nursing home, because he CANNOT manage his 13 different medications on his own! They said he has to use mail-order for all his maintenance medications. HOWEVER, it turns out that he can also keep going to CVS pharmacies and get the meds there as often as he wants to. Too bad he still won't know when to take what because of his dementia!
So go ahead, keep rooting for bigger and more efficient. They're really taking care of their patients!
p.s. I do realize that this case is an exception to the rule, but it still does not excuse the refusal to make any special case exception and not authorize the poor man to get his meds in the proper packaging!
This also helps collect data on all prescriptions for use in quality management programs (e.g., compliance monitoring). Prescriptions obtained through the $4 cash program would not be included in the integrated claims databases.ReplyDelete
Thanks for your comment.
Are you suggesting that $4 cash pay purchase at a Wal-Mart store doesn't have a claim processed (bad for compliance), but the CAT program gets the scrips back into the system, so it's good. Am I interpreting your comment correctly?
FYI, I asked Wal-Mart a question about claims processing for $4 generics on a conference call last September. Wal-Mart said that it always files the claim, even if there is no reimbursement. See the last section of my 9/2007 post Wal-Mart adds some $4 generics (yawn).
After implementation of their program we saw a drop in generic claims from WalMart stores when reviewing claims data from the PBMs. I think it would be difficult to process every claim through the PBM, even if they intend to submit the claims. I got my generic Zocor through WalMart and never told them about my prescription coverage. They never asked.ReplyDelete
I looked at this issue because my company screens integrated claims data for care gaps and notifies the patient's physician. The most common problem is non-compliance and early discontinuation of medications. But it also applies to such gaps as patients not receiving beta-blockers post-MI and many others.
I run a second generation independent pharmacy. I shop at my local walmart and often stop by to see what they are doing at their pharmacy. There is no way that walmart offers the service that I can. Since when do we care only about price and not about health outcome?ReplyDelete
Speaking of kickbacks: I forward this irreplaceable blog to so many leaders of industry that I believe I am entitled to a portion of your subscription fees.
(I promise to use the windfall to purchase toxic mortgage-based assets in order to reduce the burden of the bailout on we, the people.)
This is actually an ingenious strategy on the part of WMT, that few are failing to recognize. With WMT's intended approach, they will lower the cost of product-based healthcare to both the patient and the employer (the two ultimate payers and the two that have the vested interest in positive outcomes). The main criticism that this approach has received from industry is that prescriptions are typically paid for by PBMs and indirectly Health Plans. WMT can only offer a piece of what these entities can provide, and therefore it is difficult to disintermediate them. In the CAT example, CAT is self-insured so WMT mitigates channel conflict with the PBM and Health plan. If this pilot is successful, watch them continue to go after other large self-insured corporations and it will produce a slow decaying effect on the Health Plan and PBM model. Very smart on behalf of WMT. Lee Scott (their CEO) is sticking to this vision he laid out at the World Healthcare Congress April of 2006.ReplyDelete
I find it ironic that someone posts to the blog that they shop at Walmart but question how their pharmacy customer can do the same?ReplyDelete
If you don't like what Walmart is doing for this country maybe you should change your shopping habits before you ask others to do so. Deal with your local businesses, your neighbors. I would guess that this pharmacist only buys from one of the big 3 wholesalers and won't give a local distributor the time of day. Sometimes we need to look in the mirror before we look out our window at others.