Managed Care - April 2008 - (Page 37) ticular — generic prices — PBMs may be facing their last stand defending sizeable margins. It all started with a few words from Wal-Mart’s chief executive to its 7,000 store managers. “This year, we will be contracting with select employers in the United States to help them manage how they process and pay for prescriptions claims,” said CEO Lee Scott. “Our approach will be based on taking out unnecessary costs, while providing high quality health care products and services. With this effort, we believe we can save employers more than $100 million this year alone.” will probably continue that partnership for one to two years as it explores the market and assesses the opportunities. Says Dross: “At the conclusion of that, they’ll decide if they want to continue on the path they’ve established or get more aggressive.” “Wal-Mart is national and everyone recognizes them,” says Susan Hayes, a benefits consultant and principal in Pharmacy Outcomes Specialists. “One of their selling strengths will be to go to both managed care and employers and say, your employees/members come here anyway.” A Wal-Mart PBM could pressure other PBMs to cut the price of generics, reducing their profit margins. Medco, one of the country’s biggest PBMs, quickly picked up the gauntlet. “Many people shake in their boots when they hear the name Wal-Mart in any industry,” Medco CEO David Snow told the Newark Star-Ledger. “This is a very complicated business with serious barriers to entry. I just don’t think they’re going to pull it off. You just don’t snap your fingers and say you’re going to be a pharmacy-benefits manager.” That’s one of the few impromptu remarks Medco officials have allowed themselves. The PBM declined to make anyone available for an interview with this magazine, limiting itself to a terse statement touting its new initiatives are aimed at “improving patient outcomes and reducing overall health care costs.” “It’s a conflicted model that won’t work,” Express Scripts asserted in its statement to MANAGED CARE. “Our clients and patients value working with Express Scripts because we are aligned with their interests and independent of retail pharmacies and drug manufacturers.” Wal-Mart was even less revealing, and WellPoint won’t even say whether the two companies are working together. Dross feels that Wal-Mart is taking a measured approach by partnering with WellPoint Next Rx. “They’ll likely maintain that partnership for the short term.” Wal-Mart will take the lead on marketing the pharmacy plan while WellPoint Next Rx handles the back office work administering the drug plans, says the pharmacy consultant. The giant retailer Given Wal-Mart’s market strength in rural areas, it’s likely to be a big player in those communities, adds Hayes. “If you have a big plant in Tuscaloosa, Miss., and there’s a Wal-Mart, chances are your employees go there already.” It’s unlikely that any kind of PBM strategy will revolve around a network of pharmacies restricted to Wal-Mart stores, adds Dross. More likely, the retailer will add chains of pharmacies in non-competing grocery stores, extending its network of stores into neighborhoods where Wal-Mart doesn’t reach. “I think their impact is felt more strongly on the retail side for the generic drug program than the PBM side,” says Dross. “Every prescription that gets pushed over from CVS to Wal-Mart is taking their core business.” Selling at a loss? That’s a business case, though, that Wal-Mart still has to make. “In this year’s upcoming sales cycle I don’t plan on treating Wal-Mart any differently than I treat any other PBM,” says Dross. “In discussions with clients, we’ll see if they should be included in the bidding process.” “Like others, they are talking a lot about scale and leverage,” says Dross. “That has to be reflected in pricing: Is the offer as good as or better than the offer on the table?” Next, says Dross, Wal-Mart will have to convince employers that workers can get their prescriptions conveniently. APRIL 2008 / MANAGED CARE 37
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