Pharmacy Benefits Management – Medco

Buyer Details
Member Industry: Chemical Manufacturer
Revenue: $2.7 billion
Employees: 4,600

Existing Condition
In 2005, the pharmacy benefit plan of a chemical manufacturing company with $2.7 billion in revenue and 4,600 employees was up for renewal. The plan managers were considering keeping its existing benefit plan under the umbrella of a large national health plan. However, the company’s purchasing team recognized substantial savings opportunities by carving out the pharmacy benefit with Medco Health Solutions, the nation's leading pharmacy benefit manager, by signing Corporate United’s leveraged contract.

Solution
The purchasing team evaluated the Corporate United offer and worked closely with a pharmacy benefit management consultant to evaluate both the short- and long-term advantages of managing the pharmacy benefit apart from the plan's existing medical benefits program. The team was most interested in Medco’s ability to manage pharmacy costs better than the existing provider, and it recognized that the company was missing opportunities to gain better control over existing costs. Through the Corporate United offering, the company also saw that it could partner with a vendor committed to Six Sigma Quality levels and operational and organizational excellence. Medco is well regarded for its high quality dispensing operations, which are significantly more accurate than hospitals or retail operations, exceeding Six Sigma levels of dispensing accuracy, an error-free rate, unmatched by any retail pharmacy.

Results
With the help of Corporate United, the purchasing team convinced the benefits department of the long-term value of switching the pharmacy benefit to Medco, and on January 1, 2005, a new contract was put in place. In year one of the plan, the focus was on transitioning members to the new plan with Medco. The company recently renewed their contract with Medco after discussing a strategy and specific recommendations for implementing gradual changes to the plan over a three-year time frame. The recommendations are projected to net the company incremental savings of nearly $1.3 million, and are all based on patient safety, efficacy, and Six Sigma quality.

The company plans to implement three key savings programs later this year that are expected to garner about $400K in savings. These programs include a combination of financial incentives, employee communications, and plan rules that are designed influence the plan's employees and their dependents to choose lower cost drugs and use a lower cost channel for obtaining prescription medications.