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AIS's Health Business Daily
Featured Story Aug. 31, 2009 Wal-Mart Adds More Employers to Its Retail Pharmacy Fulfillment Program Reprinted from DRUG BENEFIT NEWS, biweekly news, data and business strategies for health plans, PBMs and pharmaceutical companies. By Jill Brown, Managing Editor, (jbrown@aispub.com) Wal-Mart Stores, Inc. says it has added more employers to the pharmacy fulfillment program it launched with Caterpillar Inc. last fall. The retail giant also is piloting a mail-order pharmacy service in Michigan, but says it won’t integrate the two until it sees results from the mail-order program. Wal-Mart maintains that it’s not planning to jump into the pharmacy benefit management (PBM) business, however.
Mike Struhs, director of business development at Wal-Mart Health and Wellness, tells DBN that the new employer clients are a “variety of sizes in different parts of the company,” although he declines to name specific companies. The Wal-Mart Health Solutions Affordable Prescription Program is aimed at “providing [pharmacy] pricing directly to the payers, whether that be self-insured employers or health plans.” He declines to say whether any of the new clients are health plans.
Under the Caterpillar program, the employer’s 70,000 workers, retirees and dependents can fill generic drugs for free at Walmart stores and obtain generics at other pharmacies for the normal $5 copayment. The deals with other employers are “similar in the fact that the employer has an incentive to encourage their employees to use Walmart pharmacies because of the preferred pricing at Walmart,” Struhs says. “So they do modify their plan design in some ways.”
But the employers maintain their relationships with PBMs. “This program is all about passing on savings and hopefully adding efficiencies and access to the system,” Struhs emphasizes. “This program is not about claims processing.” He says Wal-Mart is not offering to perform claims adjudication, pharmacy network management or other traditional PBM services.
“Wal-Mart, from my perspective, is not out to become a bigger PBM, but instead to change the nature of the relationships that currently exist within the payer/manufacturer/PBM/beneficiary relationship,” says Adam Fein, Ph.D., president of Pembroke Consulting, Inc., a Philadelphia-based management advisory and business research firm, and the author of the DrugChannels.net blog. “What Wal-Mart is doing here is they are trying to attack a fundamental profit source for PBMs without becoming a PBM themselves.”
There are many Walmart locations in Illinois, where Caterpillar employees are primarily based. Struhs says “this program works for any employer who may have employees who are generally close to a Walmart. That doesn’t always mean that it’s their corporate office employees — it could be plant locations.” Wal-Mart has 4,100 pharmacies across the country, including 500 in Sam’s Club warehouse stores.
Wal-Mart is continuing to use a cost-plus pricing methodology in its employer contracts, as it did with Caterpillar. “We based it on what we pay for a drug, and then we have a proprietary formula for the drug which we apply to cover our costs for overhead and pharmacists’ salaries and electric bills…and come up with the cost that the employer will pay for that drug,” he says.
“The amount of savings [employers get by making Wal-Mart the preferred pharmacy] can vary on an employer-by-employer basis, depending on their mix of drugs and what they’re currently spending,” Struhs says. “We typically find we can save employers about 30% to 35% on generic drug costs and usually some savings on brand drugs as well.”
Wal-Mart also launched a pilot mail-order program in May 2009 under which Michigan residents can get a 90-day supply of any of 300 generic prescriptions for $10, including delivery. The goal is to expand access to Walmart pharmacies “whether or not they live close to a Walmart pharmacy location,” the company explained. The free mail delivery program also includes 3,000 other brand and generic prescriptions through Wal-Mart’s Dallas-based mail-order facility.
The company has offered a ship-to-home pharmacy program for several years, Struhs says, but it has not yet been incorporated into the Employer Solutions program offered to payers. “I don’t think that the decision would be made until we know the effects of the pilot program,” he adds. |
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