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FEHBP [Federal Employees Health Benefits Program] Pharmacy Copays
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FEHBP [Federal Employees Health Benefits Program] Pharmacy Copays
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Jennifer Klein's Files
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February 14, 1996
The Honorable Mike Jaros
Member of the House of Representatives
of the State of Minnesota
St. Paul, Minnesota 55155-1298
Dear Mike:
Thank you for your letter regarding
changes to the federal employees' health
benefits package. The change for those
who select the standard option for pharmacy
coverage has occurred, and I understand
your concerns regarding this matter. My
Administration will review this issue over
the course of the next year.
I appreciate having your perspective,
and I'm glad you took the time to write.
Sincerely,
BILL CLINTON
BC/SEM/JFB/bws
(Corres. #2691010)
(2.jaros.m)
CC: w/inc Jen Klein, WW
CC: IGA
Hale Mike Jaros
147510
OF
G
111 NOED
State Representative
S.
IEON
Minnesota
111
House of
District 7B
St. Louis County
GRF
Representatives
1858
Irv Anderson, Speaker
CHAIRMAN, INTERNATIONAL TRADE AND ECONOMIC DEVELOPMENT
COMMITTEES: AGRICULTURE; TAXES; SALES AND INCOME TAX DIVISION
December 19, 1995
President Bill Clinton
The White House
Washington, DC 20500
Dear President Clinton:
Recently, my pharmacist told me of a change in the benefit
package federal employees receive, who are enrolled in Medicare
Part B and select the Standard Option for pharmacy coverage. I
am troubled by this change and would appreciate an explanation.
From the information I was provided, community pharmacies
participating in the preferred networks are required to begin
charging a 20% co-pay effective January 1, 1996. However,
enrollees utilizing the mail order option have no co-payment.
While I appreciate the necessity to balance the federal budget, I
would advocate that a fairer and more equitable approach be
taken. If federal employees participating in the affected plan
must begin to make co-payments to participating pharmacies,
extend the same co-payment requirement to mail order services
too.
By not adopting this standard requirement, many small, rural
pharmacists throughout the country are placed at a competitive
disadvantage. Many of these same pharmacies are already
absorbing federal and state cutbacks. Placing them in such a
disadvantaged position will cause more and more rural pharmacies
to close their doors. This will result in reduced access to
quality, affordable health care in rural areas and contribute to
their decline. I can't imagine that you support such a policy.
I would appreciate your efforts to correct this change in
benefits. Thank you for your thoughtful consideration.
Sincerely,
Mike myaros Jaros
State Representative
619 E. 6th Street. Duluth, Minnesota 55805
(218) 727-0412
State Office Building, 100 Constitution Ave., St. Paul, Minnesota 55155-1298
(612) 296-4246
House Fax (612) 296-1563
TDD 1-800-657-3550
EXECUTIVE OFFICE OF THE PRESIDENT
24-Apr-1996 12:52pm
TO:
Jennifer L. Klein
TO:
Christopher C. Jennings
FROM:
Marilyn Yager
Office of Public Liaison
SUBJECT:
opm/hhs meeting with nacds/nard
I talked with Jack Ebeler regarding hte meeting on monday. He
said that the case the drug stores made was too conceptual and n-
eed to be verified by actuaries. OPM agreed to set up a meeting
with NACDS with the OPM actuaries.
However, Jack bigger concern is that should we consider any change
in the contract (at least not with a transition) that retirees
would be upset that they had been enticed to use mail order with
the no copay draw, and then the next year told there would now be
a copay. Jack thinkgs we would be attacked for "bait and
switching."
I have not yet talked to NACDS to find out their view of the
meeting.
001/003
04/15/96 14:29
202 401 7321
DEPARTMENT OF HEALTH AND HUMAN SERVICES
ASSISTANT SECRETARY FOR PLANNING AND EVALUATION
OFFICE OF HEALTH POLICY
human SERVICES ,USA
HEALTH
=
DEPARTMENT
PHONE: (202) 690-6870 FAX: (202) 401-7321
Date:
From: Jace Sbeler
To:
walt Farces
Marilyn yeage
CC: Chris Jennings
Phone: (202) 690-
Phone:
Jennifer clin
(202) 690-6870
Nancy ann Min
FAX: (202) 401-7321
Fax:
Number of Pages (Including Cover):
Brief backgrounder that we descussed
Comments:
on Mail orde Pharmacy
04/15/96
14:29
202 401 7321
1
002/003
Walt
Francis
April 15, 1996
690-8291
HHS/ASPE
FEHBP Prescription Drug Coverage and the Blue Cross Mail Order Program
For a number of years, most fee-for-service plans in the FEHBP have offered discount mail order
pharmacy programs to enrollees, in addition to the option of using local pharmacies. For 1996,
twelve of the sixteen fee-for-service plan options include a mail order benefit. (In the D.C. area,
one in five HMOs also offers such a benefit.)
All fee-for-service plans also offer special cost-sharing for enrollees for whom Medicare is the
primary payer (this is true for almost all persons over 65 who have retired since 1984; some older
annuitants do not have Medicare coverage, however). Both deductibles and coinsurance for
hospital and physician benefits are waived in all cases.
Prescription drug benefits are more complex. Two plans that are popular with seniors. American
Postal Workers Union (APWU) and National Association of Letter Carriers (NALC), waive both
deductible and coinsurance for both mail order and retail pharmacy when Medicare Part B is
primary and a network pharmacy is used. These plans are open to all seniors, and their costs for
premium and unreimbursed expense are as good as any others.
Two other popular plans, Blue Cross Standard Option and Government Employees Hospital
Association (GEHA), waive all charges for mail order drugs but require some cost-sharing for
retail pharmacy purchases. For retail purchases, both plans drop the deductible, but do require
coinsurance (for Blue Cross, 20%).
Other plans present still other choices. The Mail Handlers High Option, for example, has better
than average dental benefits but offers no waiver of its prescription drug deductible or
coinsurance for Medicare enrollees.
Recent controversy has arisen not over the general structure of pharmacy options, but because
until 1996 Blue cross waived its drug deductible and coinsurance for both mail order and retail
purchase by Medicare enrollees. For 1996, Blue Cross dropped 100% reimbursement for
purchases at retail pharmacies, in order to contain its premium costs.
Benefit reductions (and increases) are not unusual in the FEHBP. as plans attempt to contain
costs and attract enrollees through the combined package of benefits, copayments, and premium.
Many such changes are disruptive of established patient and provider relationships. Most of the
fee-for-service plans, for example, have established major incentives to use "preferred" providers.
This particular Blue Cross change, however, was unusually controversial because it disrupted
established patterns of usage for many persons who had never used mail order before and because
SO many retail providers were disadvantaged. Blue Cross executives are understood to have
instituted the change only with great reluctance.
The preferential treatment of mail order prescriptions has indeed had effects. So many seniors
started using mail order that the Blue Cross mail outlets were swamped in January and February.
04/15/96
14:30
202 401 7321
1
003/003
The Office of Personnel Management (OPM) told Blue Cross that the ensuing delays were
unacceptable. By the end of February, delays were reduced and Blue Cross claimed that virtually
all prescriptions were being dispensed and mailed within five days.
In the FEHBP program, OPM insists that plans cover both broad categories of expense (hospital,
doctor, drug) and some specific procedures (childhood immunizations). OPM also puts
substantial pressure on all plans to keep premiums down. By law. any premium increase for Blue
Cross and four other plans raises the government's contribution for the entire program and OPM
scrutinizes these plan's costs especially closely. OPM does not, however, seek to dictate the
particular levels of coverage or the precise deductibles or coinsurance levels set by the plans.
These specific decisions are left to plan discretion, subject to OPM actuarial review.
In this instance, Blue Cross is reported to have estimated that the effects of the reduced benefit
for retail pharmacy by Medicare participating enrollees (who constitute about half of the Blue
Cross enrollment) would be to reduce its family premium cost by about $12 a month. or over
$140 a year. Without this premium reduction Blue Cross would have experienced a significant
competitive disadvantage (the APWU plan, for example, already has a family premium $200
lower than that of Blue Cross, and the cost difference might have risen to well over $300). There
would also have been significant effects on the overall FEHBP budget--possibly approaching $100
million a year in increased cost to the government under the statutory formula--if the Blue Cross
premium had risen this much.
Clearly, this change has been disruptive to seniors and to established provider relationships. It has
been costly to retail pharmacists. It may or may not have saved the estimated $12 a month. It
would certainly be reasonable, and arguably necessary in its fiduciary role, for OPM to review the
estimated and actual savings of this change, in relation to other possible benefit and cost sharing
changes. in negotiations over the 1997 contract.
TEL: 703-549-3001
NACDS
FAX: 703-549-0771
LAURA C. FOGT, M.H.S.
DIRECTOR, FEDERAL GOVERNMENT AFFAIRS
NATIONAL ASSOCIATION OF CHAIN DRUG STORES
413 N. LEE STREET, P.O. Box 1417-D49, ALEXANDRIA, VA 22313-1480
TO: Jennifer
"From: Marilyn
FAX TRANSMITTAL SHEET
U. S. OFFICE OF PERSONNEL MANAGEMENT
RETIREMENT AND INSURANCE SERVICE
1900 E STREET, N.W., ROOM 4A10
WASHINGTON, D.C. 20415
Telephone (202) 606-0600
Number of Pages 4
(Including Cover Sheet)
TO: Marilyn Yeager
DATE:
4/15/96
Telephone Number
Fax Number
FROM: Ed Flynn
DATE:
Telephone Number 606-0600
Fax Number
COMMENTS:
letter to John Mica from Jim Kina
re\ \ drug benefit changes
94566218 P.01
UL
AFR-15-1996 13:50 FROM ASSNC DIR RET&INS
UNITED TEATE
UNITED STATES
OFFICE OF PERSONNEL MANAGEMENT
R
WASHINGTON, DC 20415-0001
PERSON ITEL
OFFICE OF THE DIRECTOR
APR
0
1996
Honorable John L. Mica
Chairman, Subcommittee
on Civil Service
U. S. House of Representatives
Washington, DC 20515-6143
Dear Chairman Mica:
Thank you for your letter of February 13, 1996, regarding the Blue Cross and Blue Shield
Service Benefit Plan's 1996 drug benefit changes under the Federal Employees Health
Benefits (FEHB) Program. The following information is provided as you requested.
Question 1. OPM estimates that the 20 percent copayment change will save the FEHB
Program $200 million dollars. Is this savings figure for 1996? How was this savings figure
calculated? What percent of these savings is attributed to lower drug prices as a result of
using mail order vs. increased out-of-pocket copayments by enrollees?
Answer. The prescription drug benefit change is expected to save about $200 million in
1996. This figure was determined by analyzing recent prescription drug utilization and
projecting modified drug purchase patterns stemming from the 1996 benefit changes.
The combined effect of copayments and a slight decrease in utilization of retail pharmacies is
expected to account for savings of approximately $125 million, or 62.5 percent of the total.
In addition, use of the Mail Order Program is expected to account for savings of
approximately $75 million, or 37.5 percent of the total. These savings come from the lower
drug costs that result from the significant volume discounts National Rx Services was able to
obtain from drug manufacturers, and because wherever possible, the Mail Order Program
will dispense generic, rather than brand name, drugs.
Question 2. How did this copayment change transpire? Did OPM ask for the mail order
copayment change or did Blue Cross/Blue Shield propose the change?
Answer. BC/BS proposed the change in their drug benefit. Drug costs are a significant
and increasing part of the Plan's total benefit payout. Plan data indicated that 61 percent of
total costs for prescription drugs were incurred by members with Medicare Part B. More
importantly, these members used the more cost effective mail order delivery system only
10 percent of the time compared to an 80 percent usage rate among the non-Medicare
population. BC/BS was thus able to demonstrate that without incentives for increased use of
the Mail Order Program among the Medicare population, the overall Standard Option
premiums would increase by $5.42 per month for self coverage and by $12.03 for family.
CON 131-64-4
80°d
94566218
U1
RETXINS
and
DUSSE
FROM
13:51
9661-51-888
Honorable John L. Mica
2
Question 3. What other cost savings measures in the drug program were considered by
OPM in addition to this change? Were any of them implemented, and if not, why?
Answer. Initially, BC/BS proposed even broader changes in their drug benefit: extending
drug coinsurance to Medicare-enrollees in the High Option, and increasing the coinsurance
paid at retail pharmacies among all Standard Option enrollees. In view of the
disproportionate premium paid by Medicare enrollees under High Option, we rejected any
change to it. We also rejected the general increase in the drug coinsurance in the Standard
Option because the data cited in answer #2 indicated that sufficient cost reductions could bc
attained by simply extending existing coinsurance provisions to the Medicare enrollees.
Question 4. There are some early reports that Merck/Medco is unable to fill all the
prescriptions that are being sent to its mail order operation. Is OPM receiving any of these
reports? If so, how is this situation being handled? Before OPM agreed to this contract
change, did the agency ascertain the ability of Merck/Medco to handle a possibly significant
increase in prescription volume at its mail order operation?
Answer. Prior to the January 1, 1996, effective date of the benefit change, Medco projected
a significant but somewhat gradual increase in the Mail Order Program during the year and
staffed itself accordingly. We had extensive discussions with the Blues prior to
implementation, and OPM officials went on-site to evaluate first-hand Medco's capacity
planning. Both Blue Cross/Blue Shield and MEDCO felt their planning for this change was
adequate.
Unfortunately, the Carrier's projections fell short of the massive and immediate increase in
volume. Letters and calls from customers alerted us early in January to the fact that Medco
was having difficulty meeting the service standards in the Service Benefit Plan brochure.
Throughout January, we received weekly updates on volume and service problems being
experienced by the Mail Order Program, and we insisted that the Mail Order Program's
service problems be resolved by the beginning of February.
Blue Cross and Blue Shield, in conjunction with Medco, responded by developing an
aggressive operational strategy to meet the Plan's service standards and their members'
expectations. By the end of the first week of February, they had (1) hired additional
pharmacists, (2) increased their capacity to receive telephoned and faxed prescriptions,
(3) increased the number of sites at which prescriptions could be filled, (4) increased the
number of telephone representatives so individual problems could be solved quickly, (5) put
a system in place to notify members if their prescriptions could not be filled within the
service standard timeframes, (6) devised a way to waive coinsurance and deductibles for
emergency 21-day prescriptions at Preferred retail pharmacies if it appeared that the Mail
Order Program could not meet the service standard timeframes, and (7) expedited delivery of
late prescriptions by using overnight mail at no charge to members.
2019
81299576
U1
RETXINS
210
DUSSA
FRIM
25:21
Honorable John L. Mica
3
The Carrier is continuing to provide us with weekly status reports on Mail Order Program
service, and I am pleased to inform you that the Service Benefit Plan's service standards are
now being met. You may be sure that we will keep monitoring the program to ensure that
they continue to be met.
Given the 10 percent usage rate before the 1996 benefit changes, the Mail Order Drug
Program will be new to the vast majority of BC/BS' Medicare enrollees. Change always
generates some amount of concern and unease. Unfortunately, this concern was needlessly
underscored by the difficulties experienced in January. Nonetheless, we remain convinced
that our Medicare customers will ultimately give the Mail Order Program the same high
marks (4.8 on scale of 1 to 5 with 5 being Very Satisfied) that the program has received
from past users. We also believe that the 1996 benefit changes, decided in the context of
balancing costs against benefit provisions, were in the interest of all BC/BS enrollees.
That is why we agreed to adopt them.
I hope this has answered your questions. If you have others, please let me know.
Sincerely,
Director James R. King
P.04
94566218
UI
RET&INS
DIR
JUSSE
FRIM
25:31
9661-91-888
TOTAL P.05
WILLIAM F. CLINGER. JR. PENNSYL VANIA
CARDIES COLLING ILLINOIS
CHAIRMAN
BANKING MINORITY MEMBER
BENJAMIN A GLMAN. NEW YORK
HENRY A. WAXMAN, CALIFORNIA
UAN OURTON INDIANA
ONE HUNDRED FOURTH CONGRESS
TOM LANTOS CALIFORNIA
J. DENNIS HASTERT ILLINOIS
MODERT c. WIDE, JR. WEST VIRGINIA
CONSTANCE A. MORELLA, MARYLAND
MAJOR R. OWENS NEW YORK
CHRISTOPHER SHAYS. CONNECTICUT
Congress of the United States
EDOLPHUS TOWNS. NEW YORK
STEVEN SCHIPP, NEW MEXICO
JOHN M. SPRATT, JR., SOUTH CAROLINA
(LEANA ROS-LEHTINEN, FLORIDA
LOUISE MAINTOON CLAUGI FREN NEW York
WILLIAM H. ZELIFF. JR NEW HAMPSH'RE
PAUL E. KANJORSKI, PENNSYLVANIA
JOHN M MCHUGH. NEW YORK
STARTIEN NUMN. CALIFORNIA
house of Representatives
GARY A CONDIT, CALIFORNIA
COLLIN C. PETERSON, MINNEBOTA
JOHN L. MICA, FLORIDA
KAREN L. THUFFMAN FLORIDA
PETER BLUTE, MASSACHUSETTS
CAROLYN a. MALONEY NEW YORK
THOMAS M. DAVIS. VIRGINIA
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
THOMAS M. BARRETT. SCONSIN
DAVID M. McRVTDSM, INUIANA
CENE TAYLOR, MISSISSIPPI
JON D FOX, PENNSYLVANIA
2157 RAYBURN HOUSE OFFICE BUILDING
CARBARA-ROBE COLLINS. MICHRGAN
RANDY TATE. WASHINGTON
ELEANOR HOLMES MORTON, DC
DICK CHRYSLER, MICHIGAN
JAMES P. MORAN, VIRGINIA
GIL GUTKNECHT. MINNESOTA
WASHINGTON, DC 20515-6143
GENE GREEN. TEXAS
MARKE BOUDER, INDIANA
CAMME F. VIEGA, FLURIDA
WILLIAM 1 MARTINE NEW JERSEY
February 13, 1996
CHAKA FATTAH PENNSYLVANIA
JOE SCARBOROUGH, FLORIDA
560
BILL K. BREWSTER, OKLAHOMA
JOHN SHADEOG. ARIZONA
TIM HOLDEN, PENNSYLVANIA
MICHAEL PATRICK FLANAGAN. ILLINOIS
CHARLES # BASS. NEW HAMPSHIRE
STEVE C. LATOURETTE.OHIO
BERNARD SANDERS VERMONT
MARSHALL "MARK" SANFORD, SOUTH CAROLINA
INDEPENDENT
ROBERT L EHRLICH. JR. MARYLAND
MAJORITY-(202) 225-5074
The Honorable James B. King
MINORITY-(206) 225-5051
Director
RIS
Office of Personnel Management
1900 E Street, N.W.
Washington, D.C. 20415
Dear Director King:
I am writing to apprise you of my concern, as Chairman of the Subcommittee on Civil Service about the
continuing controversy associated with the Blue Cross and Blue Shield prescription drug benefit
implemented for 1996 in the Federal Employee Health Benefits (FEHB) program.
As you may know, I have asked the General Accounting Office (GAO) to review the Blue Cross and Blue
Shield FEHB prescription drug benefit and to address questions of timeliness and availability of products
and services, and examine cost-saving aspects of the program. I am interested in supplementing this
information with your specific response to the following questions.
1. OPM estimates that the 20 percent co-payment change will save the (FEHB) program $200
million dollars. Is this savings figure for 1996? How was this savings figure calculated? What
percent of these savings are attributed to lower drug prices as a result of using mail order VS.
increased out-of-pocket CO payments by enrollees?
2. How did this co-payment change transpire? Did OPM ask for the mail order co-payment change
or did Blue Cross/Blue Shield propose the change?
3. What other cost savings measures in the drug program were considered by OPM in addition to
this change? Were any of them implemented, and if not, why?
4. There are some early reports that Merck/Medco is unable to till all the prescriptions that are
being sent to its mail order operation. Is OPM receiving any of these reports? If so, how is this
situation being handled? Before OPM agreed to this contract change, did the agency ascertain the
ability of Merck/Medco to handle a possibly significant increase in prescription volume at its mail
order operation?
Your prompt response would be greatly appreciated.
Sincerely,
John L. Mica
Chairman
Subcommittee on Civil Service
50'd 94566618
01
SNI8174
NIC
CC.CT
I
Revco®
Revco®
®
GEORGE WATT
GEORGE WATT
Vice President of Managed Care
Vice President of Managed Care
Revco D.S., Inc.
Revco D.S., Inc.
1925 Enterprise Parkway. Twinsburg. OH 44087
1925 Enterprise Parkway, Twinsburg, OH 44087
(216) 487-1000 Ext.3260 Fax: (216) 487-5070
(216) 487-1000 Ext.3260 Fax: (216) 487-5070
COST ANALYSIS
3/13/96
Federal Employees Prescription Health Benefits Program
Assumptions:
Brand AWP - Store
$ 40.00
Generic AWP - Store
$ 12.50
Brand AWP - Mail Order
$ 120.00
Generic AWP - Mail Order
$ 37.50
Mail/Store Ratio
3
Brand Discount - Store
13.00%
Generic Discount - Store
55.00%
Brand Dispensing Fee - Store
$ 2.50
Generic Dispensing Fee - Store
$ 2.50
Brand Discount - Mail
20.00%
Generic Discount - Mail
55.00%
Brand Dispensing Fee - Mail
$ -
Generic Dispensing Fee - Mail
$ 2.00
Copay Store Rxs
20.00%
Copay Mail Rxs
0.00%
Generic Substitution Rate
25.00%
Cost Per Rx
Store
Store
Store
Mail
Mail
Mail
Brand
Generic
Wt. Avg.
Brand
Generic
Wt. Avg.
AWP
$ 40.00
$ 12.50
$ 120.00
$ 37.50
1 Minus the Discount
87.00%
45.00%
80.00%
45.00%
Ingredient Cost
$ 34.80
$ 5.63
$ 96.00
$ 16.88
Dispensing Fee
$ 2.50
$ 2.50
$ -
$ 2.00
Cost per Rx
$ 37.30
$ 8.13
$ 96.00
$ 18.88
Mail/Store Ratio
3
3
NA
NA
Adjusted Cost per Rx
$ 111.90
$ 24.38
$ 96.00
$ 18.88
Dispensing Rate
75.00%
25.00%
75.00%
25.00%
Wt Avg Cost per Rx - before copay
$ 90.02
$ 76.72
Copay Contribution
20%
0%
Copay
$ 18.00
$ -
Net Cost to Government
$ 72.02
$ 76.72
Net Loss to Government for Each
Mail Order Rx
$ 4.70
6.53%
FEHBP.XLS
GTW
Page 1
COST ANALYSIS
3/13/96
Federal Employees Prescription Health Benefits Program
Assumptions:
Brand AWP - Store
$ 40.00
Generic AWP - Store
$ 12.50
Brand AWP - Mail Order
$ 120.00
Generic AWP - Mail Order
$ 37.50
Mail/Store Ratio
3
Brand Discount - Store
15.00%
Generic Discount - Store
55.00%
Brand Dispensing Fee - Store
$ 2.75
Generic Dispensing Fee - Store
$ 2.75
Brand Discount - Mail
20.00%
Generic Discount - Mail
55.00%
Brand Dispensing Fee - Mail
$ -
Generic Dispensing Fee - Mail
$ 2.00
Copay Store Rxs
20.00%
Copay Mail Rxs
0.00%
Generic Substitution Rate
25.00%
Cost Per Rx
Store
Store
Store
Mail
Mail
Mail
Brand
Generic
Wt. Avg.
Brand
Generic
Wt. Avg.
AWP
$ 40.00
$ 12.50
$ 120.00
$ 37.50
1 Minus the Discount
85.00%
45.00%
80.00%
45.00%
Ingredient Cost
$ 34.00
$ 5.63
$ 96.00
$ 16.88
Dispensing Fee
$ 2.75
$ 2.75
$ -
$ 2.00
Cost per Rx
$ 36.75
$ 8.38
$ 96.00
$ 18.88
Mail/Store Ratio
3
3
NA
NA
Adjusted Cost per Rx
$ 110.25
$ 25.13
$ 96.00
$ 18.88
Dispensing Rate
75.00%
25.00%
75.00%
25.00%
Wt Avg Cost per Rx - before copay
$ 88.97
$ 76.72
Copay Contribution
20%
0%
Copay
$ 17.79
$ -
Net Cost to Government
$ 71.18
$ 76.72
Net Loss to Government for Each
Mail Order Rx
$ 5.54
7.79%
FEHBP.XLS
GTW
Page 1
COST ANALYSIS
3/13/96
Federal Employees Prescription Health Benefits Program
Assumptions:
Brand AWP - Store
$ 40.00
Generic AWP - Store
$ 12.50
Brand AWP - Mail Order
$ 120.00
Generic AWP - Mail Order
$ 37.50
Mail/Store Ratio
3
Brand Discount - Store
15.00%
Generic Discount - Store
55.00%
Brand Dispensing Fee - Store
$ 2.75
Generic Dispensing Fee - Store
$ 2.75
Brand Discount - Mail
26.15%
Generic Discount - Mail
55.00%
Brand Dispensing Fee - Mail
$ -
Generic Dispensing Fee - Mail
$ 2.00
Copay Store Rxs
20.00%
Copay Mail Rxs
0.00%
Generic Substitution Rate
25.00%
Cost Per Rx
Store
Store
Store
Mail
Mail
Mail
Brand
Generic
Wt. Avg.
Brand
Generic
Wt. Avg.
AWP
$ 40.00
$ 12.50
$ 120.00
$ 37.50
1 Minus the Discount
85.00%
45.00%
73.85%
45.00%
Ingredient Cost
$ 34.00
$ 5.63
$ 88.62
$ 16.88
Dispensing Fee
$ 2.75
$ 2.75
$ -
$ 2.00
Cost per Rx
$ 36.75
$ 8.38
$ 88.62
$ 18.88
Mail/Store Ratio
3
3
NA
NA
Adjusted Cost per Rx
$ 110.25
$ 25.13
$ 88.62
$ 18.88
Dispensing Rate
75.00%
25.00%
75.00%
25.00%
Wt Avg Cost per Rx - before copay
$ 88.97
$ 71.18
Copay Contribution
20%
0%
Copay
$ 17.79
$ -
Net Cost to Government
$ 71.18
$ 71.18
Net Loss to Government for Each
Mail Order Rx
$ 0.01
0.01%
FEHBP.XLS
GTW
Page 1
EXPENDITURE COMPONENTS AND COST CONTAINMENT RATIOS
OF THE FEHBP BC/BS PRESCRIPTION DRUG PROGRAM
(prepared by NACDS, based on data reported by BC/BS, May 1995)
Total Drug Program Expenditures:
$1.2 billion
Total Retail (66%)
$800 million
Total Mail Order (33%)
$400 million
Total Retail Component
$800 million
Manufacturers Component (75%)
$600 million
Pharmacy Component
(25%)
$200 million
Total Mail Order Component
$400 million
Manufacturers Component (75%)
$300 million
Pharmacy Component (25%)
$100 million
Total Manufacturers Component
$900 million
Assume 3:1 brand:generic
expenditure distribution
Brand Expenditures
$675 million
Generic Expenditures
$225 million
Total Pharmacy Component
$300 million
Cost Containment Ratios
1. Manufacturers Rebates/Percentage of Total Program Expenditures
Medicaid:
19.5% average
BC/BS FEHBP (actual):
5.8% average
BC/BS FEHBP (estimated):
Percent of Drug
Percent Rebate
Total
Category Receiving
Savings
Rebate
(millions)
100% Brand ($675 million)
15%
$101
100% Generic ($225 million)
11%
$ 25
50% Brand ($338 million)
10%
$ 34
50% Generics ($113 million)
5%
$ 6
Drug Manufacturer Rebates
Total brand name (??) discounts: 21% or $69 million in
savings/$1.2 billion total program = 5.8%.
Total brand name savings/total brand name expenditures:
(includes discounts, PA and BTB substitution)
$78 million/$675 million total brand = 12%
Generic discounts: $23 million/$225 million total generic
expenditures: 10%
2. Pharmacy Cost Containment/Percentage of Total Pharmacy Component
$196 million pharmacy discounts/$327 total savings:
60 percent total savings from pharmacy
$196 million pharmacy discounts/$300 million total pharmacy component:
65 percent of total pharmacy component are reduced
Summary of Cost Containment as a Percentage of
(Total Expends), Incurred Expenditures, Savings:
Brand Name Drugs (56%):
12%, 21%
Generic Drugs: (10%)
10%, 7%
Pharmacy Discounts: (25%)
65%, 60%
fepstat.opm
Savings to the FEHBP Program as Reported
by Blue Cross and Blue Shield
DUR
Manufacturer
9%
Discounts
Brand to Brand
21%
Substitution
2%
Prior
Approval
1%
MAC
7%
Pharmacy
Discounts
60%
$327 Million
Source: Blue Cross and Blue Shield Association, Presentation at May 12, 1995, National I Health Policy Forum, Washington, D.C
11/95
UNITED
STATES
United States
OFFICE OF PERSONNEL
Office of
Office of Congressional Relations
Personnel Management
Washington, DC 20415-0001
March 18, 1996
Jennifer Klein
Special Assistant to the President
Office of Management and Budget
New Executive Office Building
17th St. and Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear Ms. Stemifer Klein:
Per our meeting on March 7, attached is the information you
requested on Blue Cross/Blue Shield. If you have any questions
or comments please feel free to contact me at 606-1300.
It was a pleasure meeting with you and I look forward to
working with you in the future.
Sincerely
Cynthia Cynthra Brock-Smith
Director
OCR-1
CON 129-36-4
February 1995
Q. The retail pharmacists estimate that they are losing $600
million in revenue as a result of the Blue Cross and Blue Shield
(BC/BS) benefit change. What is your estimate?
A.
We do not know how the retail pharmacists arrived at their
estimate. However, based on our projections, a $600 million
loss is virtually impossible. We estimated that in the
absence of the benefit change, total retail pharmacy
expenditures by the BC/BS Standard Option Medicare Part B
population would have been $656 million in 1996. Therefore,
for retail pharmacists to sustain a $600 million loss, the
affected group would have to stop using retail pharmacies
virtually entirely.
Q.
How is the $200 million savings distributed among the
various components such as coinsurance, shift to mail order,
and discounts in the mail order drug price?
A.
Of the projected $200 million savings from the benefit
change, we estimated that $91.5 million would come from
previously waived coinsurance payments. Although the source
of revenue would shift from the plan to the enrollee, the
7
retail pharmacists would not lose that amount.
We calculated a total savings of $52.4 million as a result
of anticipated increased volume discounts on both the new
mail order business and the existing mail order business
because the discount applies across-the-board. Before the
change in benefits, mail order drugs for Medicare annuitants
were estimated to cost $164 million. We assumed that an
additional $164 million of drugs previously purchased from
retail pharmacies would be purchased through mail order
under the new benefit structure. We applied a factor of 16
percent to the projected total volume to calculate the
estimated savings.
We also estimated that $19.7 million of the savings will
result from 20 percent of the prescriptions transferred to
mail order being dispensed as generics where they would have
been dispensed as brand name drugs by the retail pharmacies.
Finally, $34.4 million was projected as a result of reduced
utilization, i.e. prescriptions for shorter periods, not
filled or not written.
Q.
What part of the $200 million savings was due to discounts
to Medco on drugs from manufacturers?
A.
While we estimated savings from a volume discount, we have
no information on what portion of that discount comes from
discounts Medco gets from drug manufacturers. Our estimates
are based on the price we pay for a drug as it is charged
against the contract. We do not attempt to analyze the
components of that price. Like other large purchasers, our
policy is to hold our prime contractor, the carrier,
accountable for reliably providing quality health care
coverage to our employees at a reasonable price.
Q.
Are there measures in addition to the mail order program
that OPM could employ to yield additional savings with
respect to prescription drugs?
A.
While the mail order service will dispense a generic drug
automatically if available unless the prescription specifies
that the brand name product is required, retail pharmacists
typically dispense the generic product only if the patient
agrees. Of course, the patient has an incentive to select
the generic because he or she will be paying the coinsurance
on a smaller amount. However, since many patients still do
request brand name products, savings might be achieved by
mandating that only generics be dispensed unless instructed
otherwise by the physician. While we have no firm data on
potential savings from mandating that generic products be
dispensed if available in all cases unless the physician
specifies otherwise, we would guess that savings of between
$30 million and $40 million might be achieved.
Another option might be to impose a copayment on the
FEHB/Medicare population in BC/BS when they use the mail
order program. We estimate a potential savings of $37
million from that option.
Q.
What would be the increase in premium for 1997 if you
reverted to the 1995 benefit?
what was
A.
Without the benefit change, the 1996 monthly premium would
it change? w/ benefit
have increased by $5.42 per month for a Self Only contract
and $12.03 per month for a Self and Family contract. Given
the trend in drug price increases, we anticipate that the
premium would have to be increased by 15 percent more in
1997. The result would be a $6.22 increase for a Self Only
contract and a $13.83 increase for a Self and Family
contract.
Federal Employees Health
Benefits Program
Blue Cross Blue Shield
Prescription Drug Benefit
Changes for 1996
Prepared by the Office of Insurance Programs
United States Office of Personnel Management, March 6, 1996
Tel. (202) 606-0727
Status of FEP Mail Order Performance by Medco as of 3/5/96
According to the 1996 Blue Cross and Blue Shield brochure, enrollees should expect that:
1)
Orders received by phone or fax will be processed within two business days, but you
should allow approximately one week for delivery.
2)
Mail orders should allow approximately two weeks for delivery.
For the scripts processed at all facilities (Tampa I, Tampa II, Texas and New Jersey) on
3/5/96.
96.7% of those received by phone or fax were processed in 2 days and sent by regular
mail to the subscriber.
99.3% of those received by mail were processed in 7 days and sent by regular mail to
the subscriber.
MAR 06 '96 02:30PM
r.c
FEP MAIL SERVICE OPERATIONAL UPDATE SUMMARY - 3/6/96
Since 1/1/96, the mail service pharmacy dispensed approximately 1.7
prescriptions. Since implementation of the cost share waiver, 25,000 retail
prescriptions, 1.5%, have been dispensed.
Operations
Week of
Projections
2/26
3/4
Receipts
176,000
180,000
Dispensed
210,000
180,000
Phone/fax % in 2 days
97%
97%
Mail % in 7 days
99%
99+%
On Hand Inventory/Day
1/2 day
1/2 day
Customer Service
Call Volume
81,500
80,000
% in 20 seconds
92%
92%
% Blockage
0%
0%
% Abandoned
0.5%
0.5%
Cost Share Waiver
Waivers (Users)
4,500
2,500
% of Mail Service Users
5%
4%
Proactive Adjustments (Y-T-D)
7,500
NA
% of Rx's Dispensed (Y-T-D)
0.4%
NA
h/24k/medupdt.doc
FEB 14 '96 04:33PM
Special Operational Strategy to Address FEP Mall Service Performance
Problems
Rxs processed by the FEP Mail Service vendor that may not meet member
expectations (Operational 2/7/96)
The Mail Service vendor will (1) transmit a daily file to the Retail Pharmacy
Program vendor Identifying covered members whose Rxs may not arrive as
expected and (2) send an overnight letter to these individuals explaining that
their Rx may not arrive as expected and that they may obtain an emergency
Rx at their Preferred network retail pharmacy without coinsurance
The Retail Pharmacy Program vendor will update their files to waive
coinsurance for 14 days from the date of the letter for the members identified
by the Mail Service vendor
When applicable, member may have to pay for Rx at Preferred network
pharmacy if deductible is not met (non Med B only)
The Retail Pharmacy Program vendor will automatically issue reimbursement
checks up to deductible amount for all claims incurred during this 14 day
window, member does not have to file claim
Real time waiver of coinsurance by the Retail Pharmacy Program vendor
(Operational 2/8/96)
The Retail Pharmacy Program vendor will update a member's file to waive
coinsurance on line/real time based on a verbal statement by the member that
they are waiting for their Mail Service Rx and an emergency supply is needed
(member will be told to wait 4 hours)
Retroactive adjustments at the Retail Pharmacy Program vendor
(Operational 2/8/96)
The Retail Pharmacy Program vendor will reimburse member's coinsurance
from POS transaction on file based on a verbal statement by the member that
a Rx was obtained while waiting for the Mail Service (i.e., member does not
have to file claim)
The Retail Pharmacy Program vendor will process hard copy claims for
coinsurance reimbursement if sent by member
Retroactive deductible reimbursement at the Retail Pharmacy Program
vendor (Operational 2/16/96)
The Retail Pharmacy Program vendor will reimburse member's deductible
from POS transaction on file based on a verbal statement by the member that
a
Rx was obtained while waiting for the Mail Service (i.e., member does not
have to file claim)
h/34k/opmstrat.doc
FEB 14 '96 04:33PM
The Retail Pharmacy Program vendor will process hard copy claims for
deductible reimbursement
Med B members residing in Nursing Homes will have coinsurance waived if
a Long Term Care network pharmacy is used (Operational for individual
cases 2/8/96; systematic 2/28/96) or if a Preferred network pharmacy is
used (Operational . to be determined)
The Retail Pharmacy Program vendor will update members file to waive
coinsurance If member has Med B and is being served by a pharmacy
Identified as a Long Term Care network pharmacy
The Retail Pharmacy Program vendor will send a letter to those members
identified above explaining the benefit change the week beginning 2/26/96
Procedures will be developed to update members file to waive coinsurance if
member is residing in a nursing home, has Med B and is being served by a
Preferred network pharmacy
Med B members residing in Nursing Homes will have coinsurance level
returned to the 1995 benefit levels If a non-Preferred pharmacy is used
(Operational - to be determined)
The Retail Pharmacy Program vendor and the FEP Operations Center will
make the necessary system changes to return coinsurance to the 1995
benefit levels
Med B.members residing In Nursing Homes will have 1996 out of pocket
coinsurance payments adjusted retroactively to 1995 benefit levels as
necessary (Operational - to be determined)
The Retail Pharmacy Program vendor will make the necessary system
changes to adjust 1996 claims that will retroactively return coinsurance to the
1995 benefit levels
h/34k/opmstrat.doc
UNITED
BTATE
United States
223440 OF PERSONNEL
Office of
Personnel Management
Washington, D.C. 20415
JAN 3 / 1996
In Reply Refer To:
Your Reference:
Mr. Alan P. Spielman
Senior Vice President
Government Programs
Blue Cross and Blue Shield Association
1310 G Street, N.W., Suite 800
Washington, DC 20005
Acan-
Dear Mr. Spfelman:
This letter is prompted by our extreme disappointment in the level of customer
service that is now being provided under your mail order prescription drug program.
As you know, OPM agreed with your proposal to modify prescription drug benefits
in 1996 to provide greater incentives for use of the mail order benefit in lieu of
retail pharmacy services. An increase in the demand for mail order services was
not only predictable but was the expected and desired outcome. While you did
estimate increases in demand, they fell short of the actual increases that have
occurred. The fact that you are not yet positioned to handle the resultant demand
is unacceptable and must be remedied immediately.
Please provide us without delay the specifics of how you intend to address this
situation. We will be visiting your primary dispensing sites in Florida and New
Jersey tomorrow, February 1, 1996, to personally assess the level of customer
service being provided. I understand representatives from the FEP Director's Office
will accompany us on these visits.
This situation must be remedied not later than Friday, February 2, 1996. In
addition, a general announcement of your proposed solutions should be made
immediately with individual communication to our enrollees to follow. Until such
time that you meet the contractual customer service standards, we will need to
know what steps you intend to take to mitigate any costs incurred by customers
who may turn to local retail pharmacies because your mail order prescription drug
program could not meet their reasonable expectations for service, or who may
already have done so.
In a related area, we have recently become aware and are concerned about the
absence of individual dosage service, including bubble packaging, for mail order
customers whose care givers are accustomed to this service or may require it,
forcing the customer to use less cost effective retail pharmacy services. Had we
foreseen or been made aware of this lapse, we would have requested individual
dosage service or the continued waiver of co-pays for our Medicare covered
customers who require this service. It should be added as soon as the present
Mr. Alan P. Spielman
2
overall delivery problems are remedied. In the interim, we anticipate your
immediate development of a method to waive the coinsurance for those individuals
who require individual dosage packaging and must therefore utilize retail
pharmacies.
We cannot overemphasize the critical nature of this problem and our concern over
its prompt resolution. This situation has received the highest level of attention
within this Agency, and we are prepared to act as necessary to protect the
interests of our customers. I trust you share in our desire to rectify this situation
immediately.
Sincerely,
William 1 E. Flynn, III
Associate Director
for Retirement and Insurance
Prescription Drug Benefits continued
By mail
If your doctor orders more than a 21-day supply of covered drugs or supplies, up to a 90-day
supply, you may order your prescription or refill by mail from the Mail Service Prescription
Drug Program. National Rx Services will fill your prescription. All drugs and supplies listed
on the previous page are covered under this Program except for those that must be
administered by physicians in a clinical setting.
You pay an $8 copayment under High Option and a $12 copayment under Standard Option
for each prescription drug, supply, or refill you purchase through the Mail Service Program.
Waiver
When Medicare Part B is the primary payer, and you use the Mail Service Prescription
Drug Program, your copayment is waived after you supply proof of your enrollment in Part B
directly to National Rx Services (see page 39).
To claim benefits
The Plan will send you information on the Mail Service Prescription Drug Program. To use
the Program:
1) Complete the initial mail order form.
2) Enclose your prescription and copayment.
3) Mail your order to National Rx Services, P.O. Box 30491, Tampa, FL 33630.
4) Allow approximately two weeks for delivery.
Alternatively, your physician may call in your initial prescription at 1-800/262-7890. You
will be billed later for the copayment. After that, you may then call the same number to order
your refill, and either charge your copayment to your credit card or have it billed to you later.
Orders will be processed within two business days, but you should allow approximately one
week for delivery.
Prior approval
Certain prescription drugs and supplies may require prior approval before they will be
covered under this Plan. Call 1-800/624-5060 to obtain an updated list of prescription drugs
and supplies that require prior approval. Once prior approval has been obtained, you may take
advantage of electronic claims processing at Preferred pharmacies, have claims paid for drugs
and supplies purchased from Non-preferred pharmacies, or have drugs and supplies dispensed
by the Mail Service Program.
Retail Pharmacy
The Retail Pharmacy Program will request the medical evidence needed to make its coverage
Program
determination. Drugs and supplies that require prior approval also require 1) payment in full
at time of purchase (including Preferred pharmacies) and 2) the member's submission of the
expense(s) on a claim form. Preferred pharmacies will not file these expenses for you.
Mail Service
National Rx Services will screen all prescription drugs prior to dispensing. If the drug or
Program
supply requires prior approval, your prescription will not be filled until prior approval has
been obtained. The prescription will be returned to you along with a Prior Approval Request
form and a letter explaining the program and procedures.
Drugs from other
Prescription drugs and certain supplies not purchased from a retail pharmacy or through the
Mail Service Program are covered at Other Medical Benefits levels when billed for by an
sources
outpatient facility or a physician (see pages 22 and 23), or Additional Benefits levels when
billed for by a covered home health care agency (see page 27) or home hospice agency (see
page 28). When hospitalized, drugs and supplies are covered under Inpatient Hospital
Benefits (see page 12) or Maternity Benefits (see page 18).
Purchasing drugs when
Claims for covered prescription drugs and supplies purchased outside of the United States and
Puerto Rico should be submitted on an Overseas Claim Form and sent to the Overseas Claims
you are overseas
Section address listed on page 34. Prescription drugs requiring constant refrigeration cannot
be shipped to APO/FPO boxes by the Mail Service Prescription Drug Program.
Coordinating with
When you use a Preferred retail pharmacy and this Plan is the primary payer, you must call
other drug coverage
the Service Benefit Plan Retail Pharmacy Program at 1-800/624-5060 to request a statement
of benefits for other coverage purposes.
30
Prescription Drug Benefits continued
By mail
If your doctor orders more than a 21-day supply of covered drugs or supplies, up to a 90-day
supply, you may order your prescription or refill by mail from the Mail Service Prescription
Drug Program. National Rx Services will fill your prescription. All drugs and supplies listed
on the previous page are covered under this Program except for those that must be
administered by physicians in a clinical setting.
You pay an $8 copayment under High Option and a $12 copayment under Standard Option
for each prescription drug, supply, or refill you purchase through the Mail Service Program.
Waiver
When Medicare Part B is the primary payer, and you use the Mail Service Prescription
Drug Program, your copayment is waived after you supply proof of your enrollment in Part B
directly to National Rx Services (see page 39).
To claim benefits
The Plan will send you information on the Mail Service Prescription Drug Program. To use
the Program:
1) Complete the initial mail order form.
2) Enclose your prescription and copayment.
3) Mail your order to National Rx Services, P.O. Box 30491, Tampa, FL 33630.
4) Allow approximately two weeks for delivery.
Alternatively, your physician may call in your initial prescription at 1-800/262-7890. You
will be billed later for the copayment. After that, you may then call the same number to order
your refill, and either charge your copayment to your credit card or have it billed to you later.
Orders will be processed within two business days, but you should allow approximately one
week for delivery.
Prior approval
Certain prescription drugs and supplies may require prior approval before they will be
covered under this Plan. Call 1-800/624-5060 to obtain an updated list of prescription drugs
and supplies that require prior approval. Once prior approval has been obtained, you may take
advantage of electronic claims processing at Preferred pharmacies, have claims paid for drugs
and supplies purchased from Non-preferred pharmacies, or have drugs and supplies dispensed
by the Mail Service Program.
Retail Pharmacy
The Retail Pharmacy Program will request the medical evidence needed to make its coverage
Program
determination. Drugs and supplies that require prior approval also require 1) payment in full
at time of purchase (including Preferred pharmacies) and 2) the member's submission of the
expense(s) on a claim form. Preferred pharmacies will not file these expenses for you.
Mail Service
National Rx Services will screen all prescription drugs prior to dispensing. If the drug or
Program
supply requires prior approval, your prescription will not be filled until prior approval has
been obtained. The prescription will be returned to you along with a Prior Approval Request
form and a letter explaining the program and procedures.
Drugs from other
Prescription drugs and certain supplies not purchased from a retail pharmacy or through the
Mail Service Program are covered at Other Medical Benefits levels when billed for by an
sources
outpatient facility or a physician (see pages 22 and 23), or Additional Benefits levels when
billed for by a covered home health care agency (see page 27) or home hospice agency (see
page 28). When hospitalized, drugs and supplies are covered under Inpatient Hospital
Benefits (see page 12) or Maternity Benefits (see page 18).
Purchasing drugs when
Claims for covered prescription drugs and supplies purchased outside of the United States
Puerto Rico should be submitted on an Overseas Claim Form and sent to the Overseas Claims
you are overseas
Section address listed on page 34. Prescription drugs requiring constant refrigeration cannot
be shipped to APO/FPO boxes by the Mail Service Prescription Drug Program.
Coordinating with
When you use a Preferred retail pharmacy and this Plan is the primary payer, you must call
other drug coverage
the Service Benefit Plan Retail Pharmacy Program at 1-800/624-5060 to request a statement
of benefits for other coverage purposes.
30
BACKGROUND INFORMATION ON PRESCRIPTION BENEFIT CHANGES
Historical Prescription Benefit Changes
Standard Option
1992: Calendar year deductible - $250; no separate prescription deductible.
25% of UCR coinsurance for enrollees for retail prescriptions.
$10 copay for mail order prescriptions.
When Medicare Part B coverage is primary - calendar year deductible
waived.
25% coinsurance for retail prescriptions waived.
$10 copay for mail order prescriptions waived.
1993: Preferred Retail Pharmacy Program implemented.
$50 prescription deductible initiated.
20% coinsurance of Preferred Provider Allowance (PPA) for enrollees who
used a Preferred Retail Pharmacy and 40% coinsurance of billed charges for
enrollees who used non-preferred pharmacies.
Paper claims must be submitted to get reimbursement for prescriptions filled
at a retail pharmacy.
$12 copay for mail order prescriptions.
When Medicare Part B coverage is primary - prescription deductible waived.
20% coinsurance for Preferred Retail Pharmacy prescriptions and 40%
coinsurance for non-preferred pharmacy prescriptions waived.
$12 copay for mail order prescriptions waived.
1994: On-line, point of service, Preferred Retail Pharmacy Program Network
implemented; paper claims only necessary when a non-preferred
pharmacy used.
$50 prescription deductible .
20% coinsurance of Preferred Provider Allowance (PPA) for enrollees who
used a Preferred Retail Pharmacy and 40% coinsurance of billed charges for
enrollees who used non-preferred pharmacies.
$12 copay for mail order prescriptions.
When Medicare Part B coverage is primary - prescription deductible waived.
Coinsurance was waived when enrollees used a Preferred Retail Pharmacy
but a 20% coinsurance of billed charges was applied when enrollees used a
non-preferred pharmacy.
$12 mail order copay waived.
1
1995: Same benefit as 1994.
1996: $50 prescription deductible.
20% coinsurance of PPA for enrollees who use a Preferred Retail Pharmacy
and 40% coinsurance of billed charges for enrollees who use non-preferred
pharmacies.
$12 copay for mail order prescriptions.
When Medicare Part B coverage is primary - prescription deductible is
waived.
20% coinsurance when a Preferred Retail Pharmacy is not waived and 40%
coinsurance when a non-preferred pharmacy is used is not waived.
$12 copay for mail order prescriptions is waived.
Actuarial and Statistical Background
The latest trends for the prescription benefit has been a 20% increase
for each year.
In 1994: 21% ($1.2 billion) of the total BC/BS health plan costs were
for prescription drugs. 61% of the total BC/BS plan pharmacy costs
were incurred by enrollees with Medicare Part B;
13% of the BC/BS non-Medicare enrollees' health plan costs were for
prescription drugs;
and, 45% of the BC/BS Medicare population's health plan costs were for
prescription drugs.
Without a cost sharing mechanism, there is no incentive to use the
prescription benefit judiciously. For example, in 1994, Standard Option
enrollees over 65 covered under a Self Only contract with Medicare Part B
had an average of 23.2 prescriptions filled. This group has the deductible
and coinsurance waived. Those Standard Option enrollees over 65 covered
under a Self Only contract without Medicare Part B had an average of 14.9
prescriptions filled. This group pays the prescription deductible and the
coinsurance. When all cost sharing is waived, utilization increases.
Before 1993 and before the advent of the on-line Retail Pharmacy Program,
it was easier for an enrollee to use the Mail Order Program than to file claims
for reimbursement for prescriptions purchased at a retail pharmacy. After
the implementation of the on-line Preferred Retail Pharmacy Network in
1994, it became easier to use a retail pharmacy than the Mail Order
Program. Without any cost sharing mechanism, there was no incentive for
2
the retirees who are covered under Medicare Part B to use the Mail Order
Program. Enrollees not covered by Medicare Part B continued to be
incentivised to use Mail Order and did.
Non-Medicare (Actives
Medicare Part B Covered
and Retirees)
Pre 1993 Prescription
Retail - 33% of RX costs
Retail - 67% of RX costs
Cost Mix
Mail Order - 67% of RX
Mail Order - 33% of RX
costs
costs
1994 Cost Mix
Retail - 50% of RX costs
Retail - 80% of RX costs
Mail Order - 50% of RX
Mail Order - 20% of RX
costs
costs
1994 Number of
Retail - 20% of RX's
Retail - 90% of RX's
Prescriptions
filled
filled
Mail Order - 80% of RX's
Mail Order - 10% of
filled
RX's filled
Projected Savings
For 1996, the BC/BS Plan will realize an 18% savings on each
prescription filled through the Mail Order Program rather than through
retail pharmacies.
The BC/BS Plan will save approximately $200 million in 1996 due to
the change in the prescription benefit.
Without the prescription benefit change, the 1996 biweekly premium
for Standard Option would have cost an additional $2.50 per Self
Only contract and $5.55 per Self and Family contract.
3
CUSTOMER SATISFACTION
1994
The Mail Order Program filled 5,216,029 prescriptions for Federal enrollees.
The Retail Pharmacy Program filled 28,958,840 prescriptions.
The Gallup Customer Service Satisfaction Survey results, on a scale of 1 to
5 with 5 being very satisfied, were:
Mail Order Program = 4.8
Retail Pharmacy Program = 4.6
Mail Order Turnaround Standards
If the prescription is phoned in - 97% are to be filled and put in the mail
within 2 business days.
If the prescription is mailed in - 99% are to be filled and put in the mail
within 5 business days.
Current (October 1995) Performance for the Mail Order Program Turnaround
Phoned in prescriptions - 96.9% filled within two business days.
Mail in prescriptions - 99% filled within 5 business days.
4
RETIREES' CONCERNS ABOUT MAIL ORDER PRESCRIPTIONS
Extended turn-around time for urgently-needed prescriptions
When a physician calls in an initial prescription or the enrollee or physician
calls in a refill, the prescription order will be processed usually within two
business days and delivered within one week. If the enrollee needs to begin
using the medication immediately, the physician can write a prescription for
one week's supply that could be filled at the retail pharmacy to tide the
enrollee over until the Mail Order prescription is delivered.
Mail Order Turnaround Standards
If the prescription is phoned in - 97% are to be filled and put in the mail
within 2 business days.
If the prescription is received by mail - 99% are to be filled and put in the
mail within 5 business days.
Loss of mailed items or theft of prescriptions from mailboxes
The prescription packages will be as safe as any other mail that the enrollee
receives. There is nothing on the package to indicate that the contents are
prescription medicines. The return address on the package simply states
"National".
Certain controlled drugs (i.e., Ritalin, morphine derivatives) are shipped via
Federal Express or U.P.S. and require a signed receipt for delivery.
In the event that a drug is lost or stolen, a replacement drug will be sent to
the patient without charge.
Inability to obtain brand-name drugs or substitution of generics by the Mail
Order Program pharmacists
With regard to generic substitutions, the Mail Order Program works the same
as the Retail Pharmacy Program. By submitting a prescription to the Mail
Order Program or to the retail pharmacy, the enrollee is authorizing them to
substitute a Federally approved generic equivalent, if available, unless the
enrollee or the physician specifically requests a name brand. Generic
substitution has been a part of the BC/BS prescription benefit for many
years. The physician may ensure that a generic substitution is not made by
writing "DAW" (Dispense as Written) on the prescription and the enrollee
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may advise the pharmacist that a generic substitution is not acceptable.
Loss of confidence in safety measures, since a local pharmacist knows the
individual's complete prescription history and usage
In the Mail Order Program a computerized "patient profile" is maintained on
each individual which includes drug history and refill activity. This profile is
integrated with prescription history supplied by the Retail Pharmacy Program
containing information on prescription drugs purchased from retail
pharmacies. Concurrent utilization review is performed each time a
prescription is filled to see if there would be any conflict with known
allergies or any adverse drug to drug interactions.
It is not always the case that an enrollee would use the same pharmacy to
fill all his/her prescriptions. Many enrollees use whatever pharmacy is most
convenient at the time that they're having the prescription filled.
Mail Order Pharmacies are not regulated
The Mail Order Pharmacies are subject to the same degree of regulation and
scrutiny as a retail pharmacy. The Mail Order Pharmacies are licensed and
regulated by the states in which they operate and comply with all applicable
state and federal regulations. The pharmacists working at these pharmacies
are licensed by their respective states just as retail pharmacists are licensed.
If a Retail Pharmacy is used, the coinsurance will be very high
Based on 1994 information, the average enrollee coinsurance amount for
brand-name prescription drugs purchased at a Preferred network retail
pharmacy is about $6.30. The average enrollee coinsurance amount for
generic drugs is about $2.00 when a Preferred network pharmacy is used.
6
MERCK/MEDCO MERGER
Per the GAO Report, "Pharmacy Benefit Managers - Early Results on
Ventures With Drug Manufacturers"
In November, 1993, Merck & Co., Inc. purchased Medco Containment
Services, Inc.
In January 1994, Merck and Medco formed the Merck-Medco U.S. Managed
Care Division. This entity marketed both Merck products and Medco
services to health plan sponsors. The Merck unit was transferred back to Merck's
Human Health Division in October 1994.
In early 1995, Merck formally adopted a policy under which Medco operates
independently of Merck.
The Federal Trade Commission will continue to monitor ventures between
drug manufacturers and Pharmacy Benefit Managers (PBMs), such as
Medco, to ensure that the PBMs maintain competitive processes that allow
manufacturers, other than their partners, to compete for inclusion and low-
cost designation for their drugs on the PBMs formularies.
*
The BC/BS contract with Medco requires written authorization on a product by
product basis by BC/BS before Medco may perform any Interventions (product
substitution) other than Interventions involving generic drugs.
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RETAIL PHARMACY DRUG BENEFIT
NON-MEDICARE
MEDICARE PART-B (PRIMARY)
PLAN NAME
PREFERRED
NONPREFERRED
PREFERRED
NONPREFERRED
BCBS
Open
High Option
15% PPA/$50 ded
35% billed charge/$50 ded
Ded/15% PPA waived
35% billed charge/$50 ded
Standard Option
20% PPA/$50 ded
40% billed charge/$50 ded
Ded waived, 20% PPA
Ded waived, 40 bill charge
Alliance
Open
Both: $200 ded, $10 copay per 30 day supply and 2 refills;
Ded waived, $10 copay per 30 day supply and 2 refills; copay
Copay increases to 50% R&C for 3 or more refills
increases to %50 R&C for 3 or more refills
Pay charges in excess of PPA
APWU
Open
$25 ded/person, $50/family
Same ded, copay 30% drug
Coinsurance and deductible waived.
charges
Copay 15% of drug charges
1st & 2nd RX $15/brand name
Same copays
Waive copay initial
No copay waiver
GEHA
Open
$5/generic, 3rd+ RX > $15 or
Pay charges in excess of PPA
RX and first refill
50% R&C/brand name, > $5 or 50% R&C/generic
Mail Handlers
Open
Both options, Chemotherapy & related drugs only:
5% copay
25% of R&C charge
No waiver of ded or coinsurance, except for chemotherapy
High Option
$300 ded per person pays 75% of actual charges
drugs
Standard Option
$600 ded per person pays 70% actual charges
NALC
Open
$25 ded/self $50/family
$25 ded/self $50/family
20% of charges
40% of charges
Ded/coinsurance waived
Ded waived but not coinsurance
Postmasters
Open
Deductible $275 for both
Coinsurance and ded waived
Same
High Option
Copay 20% discounted cost
Copay 20% eligible charge
Waives $250 of $300 ded
Coinsurance not waived
Standard Option
Copayment $10 generic, $20 brand name
Copays 25%
Association
Closed
Copay waived for all prescriptions
Copay waived for all prescriptions
BACE
Closed
$50/Self and $100/Self & Family ded, $10 copay
$50/Self and $100/Self & Family ded, $10 copay
Foreign Service
Closed
$200 ded, 20% reasonable & customary charges
$200 Ded and 20% R&C charges waived
NAPUS
Closed
Copay $4 generic, $12 brand name
Same copays
No copay waiver
30 day supply, up to 2 refills
Pay charges in excess of PPA
Panama
Closed
$400 ded, 50% reasonable & customary charges
$400 ded, 50% reasonable & customary charges
Rural
Closed
$250 ded, 25% reasonable & customary charges
$250 ded, 25% reasonable & customary charges
SAMBA
Closed
$12 copayment
$12 copayment
SSEHA
Closed
$5 generic, $12 Brand name
$5 generic, $12 brand name
8
MAIL ORDER DRUG BENEFIT
PLAN NAME
NON-MEDICARE
MEDICARE PART-B (PRIMARY)
BCBS
Open
High Option
$8 copayment
Copayment waived
Standard Option
$12 copayment
Copayment waived
Alliance
Open
$200 ded; $14 copay for brand name, $7 copay for generics
Ded waived; $14 copay for name brand; $7 copay
for generics
APWU
Open
15% R&C copay for brand name; no copay for generics
Copayment waived
GEHA
Open
$20 copay for name brand; $5 copay for generics
Copayment waived when Medicare A & B primary
Mail Handlers
Open
High Option
None
None
Standard Option
NALC
Open
$12 copay per Rx up to 90 day supply, no deductible
Deductible & Copayment waived
Postmasters
Open
High Option
$5 generic, $12 brand name
Copayment not waived
Standard Option
$10 generic, $20 brand name
Association
Closed
Copayment waived
Copayment waived
BACE
Closed
$10 copay
Copayment waived
Foreign Service
Closed
$5 copay
Copayment waived
NAPUS
Closed
$4 Generic, $12 brand name
No copay waiver
Panama
Closed
None
None
Rural
Closed
$15 copay on brand name; $10 copay on generics
$5 copay on brand name; $2 copay on generics
SAMBA
Closed
$8 copayment
$8 copayment
SSEHA
Closed
$5 generic, $12 brand name
Copayment waived
9