STAND ALONE PRESCRIPTION DRUG PLANS

The historical approach to providing coverage for prescription drugs was to include them as an eligible expense under major medical.  The plan then paid its applicable coinsurance percentage of the actual cost of the prescription to the participant.  There were no restrictions on where the participant could have his or her prescription filled or on the purchase of brand name drugs versus generic alternatives.  As a result, since the pharmacy's profit margin is greatest on brand name drugs, the great majority of prescriptions were filled brand.  Additionally, since there were no limitations on pharmacies, the cost of a given prescription varied with those purchased as smaller, single store pharmacies often cost more than the same prescription purchased elsewhere.

The net result of this historical approach has been that the cost of prescription drugs was uncontrolled and very high. This was further and substantially exacerbated by the significant increase in utilization and by the dramatic increase in the cost of drugs over the past few years.

The stand-alone prescription drug program was developed as a way of managing these costs. The service is purchased from a company typically established to provide this singular service. It will have entered into contractual agreements with both chains and with independent drug stores whereby they agree to discount the cost of both brand name and generic drugs purchased  by participants showing a card which identifies them as being covered by that company.  (Each prescription drug company issues ID cards to all of the participants covered by XYZ Company plan.) In addition to the discounted cost of drugs, these network pharmacies have also agreed to a discounted dispensing fee.

For still greater savings, almost all of these companies offer a mail-order program for maintenance drugs.  They buy drugs in mass directly from the manufacturers to fill all of their client needs.  Thus, their cost is much lower, and they therefore provide even greater discounts than are available at the retail level.  Too, since they work on a high volume basis, their dispensing for mail order is also lower.

Finally, many of these companies offer a Formulary rebate plan with their mail order program.  With respect to the more widely used drugs where alternative products are available, they negotiate with a single manufacturer for a volume rebate on that product. Each employer in the formulary plan shares in the rebate based upon the usage of the formulary drugs used by the participants.

The key is selecting the prescription Drug Company that offers the best network of pharmacies for the employees of a given employer while offering the greatest discounts. Combining this selection process with plan design which encourages the use of generic drugs can result in a significant and reduction in prescription drug costs.