Comparison of mail-order with community pharmacy in plan sponsor cost and member cost in two large pharmacy benefit plans.

Abstract

Pharmacy benefit managers (PBMs) play a major role in administering prescription drug benefit programs for health plans and employers. PBMs have often encouraged the use of self-owned mail-order pharmacy services with the promise to plan sponsors of lower prescription drug costs compared with those of the community pharmacy network. Some plan sponsors have requested a higher degree of disclosure of contract relationships and transparency in pricing. Unfortunately, little research exists based on empirical data to determine the net plan cost and member cost for mail-order drugs, as opposed to having these drugs dispensed by community pharmacies. To determine the difference between mail-order and community pharmacy in the (1) payment (cost) per day of drug therapy for the plan sponsor and for the member for the highest expenditure therapeutic classes, (2) generic dispensing ratios for all drugs and for a comparative market basket of drugs, and (3) cost per unit for the top 20 generic drugs dispensed through the mail-order channel. Pharmacy claim records were obtained from 2 publicly financed pharmacy benefit plans in Texas for fiscal year 2004 (September 1, 2003, through August 31, 2004). There were approximately 460,000 members in Plan A and 177,000 members in Plan B. Pharmacy cost per day (product costs plus dispensing fees, divided by days supply) was calculated for each drug in the 30 highest expenditure therapeutic categories and aggregated for mail-order and community pharmacy channels for each plan. Differences in the mail-order and community pharmacy cost per day were calculated for each drug (adjusted for dosage) in the therapeutic category and weighted by the product's share of mail-order therapy days within the therapeutic category. A weighted cost per day for each therapeutic category was calculated with a comparison of what the cost would have been for plan cost and member cost if all mail claims had been paid based on the community pharmacy cost per day. Comparison of the cost per day helped control for differences in quantity dispensed per day per product and for product mix within each therapeutic category. Descriptive analyses were conducted to compare generic dispensing ratios between (1) all mail-order and community pharmacy claims, and (2) a market basket of therapeutic categories most commonly found within the mail-order channel. Finally, the difference in price per unit was calculated between mail-order and community pharmacy channels for the top 20 generic drug products. Mail-order drugs accounted for 34.4% of overall pharmacy benefit spending, including plan cost and member cost, in Plan A and 43.4% for the market basket of drugs compared with 56.0% of overall spending and 63.1% for the market basket in Plan B. When comparing the cost per day for the top therapeutic categories, the authors found the plan sponsor cost was higher for mail-order than for the community pharmacy channel for approximately half of the top therapeutic categories. This result contributed to a 0.5% higher plan cost per day for mail-order ($1.24) than for community pharmacy ($1.23) for Plan A but a 0.4% lower plan cost per day for Plan B ($1.43 for mail-order vs. $1.44 for community pharmacy). The member cost was lower for mail-order than for community pharmacy for almost every therapeutic category, and overall was 29% lower in Plan A ($0.73 per day for mail-order vs. $1.03 for community pharmacy) and 37% lower in Plan B ($0.52 for mail-order vs. $0.82 for community pharmacy). For all claims, the generic dispensing ratios were lower in the mail-order channel than in the community pharmacy channel (37.7% vs. 49.0% for Plan A and 34.7% vs. 45.0% for Plan B). The cost per unit (tablet, capsule, etc.) for the top 20 generic drug products dispensed by mail order was 16.5% lower than community pharmacy for the plan sponsor in Plan A but 18.0% higher in Plan B; member cost was 29.9% lower in Plan A for mail order and 34.0% lower in Plan B. Comparing plan and member costs combined, 9 of 20 (45%) of the generic prices were higher through mail order in Plan A, and 10 of 20 (50%) were higher through mail order in Plan B. Overall, savings from lower unit pricing through the mail-order channel benefited the member and did not translate into significant cost reductions for the plan sponsor. In both pharmacy benefit plans, the plan sponsor either realized small savings or incurred slightly higher costs when paying for drugs in the top therapeutic categories through the mail-order channel. Some generic drug prices are higher through mail-order pharmacy than through community pharmacy, and 1 of the 2 plans in this study paid higher net costs after member cost share for generic drugs through mail order.