PHARMACY

$2 solution: WMT, Humana play low-price card

BY Jim Frederick


BENTONVILLE, Ark. — It’s the kind of low-price power play that gives smaller-scale independent pharmacy owners — and chain drug store operators too, for that matter — the willies. In what promises to be another potent and potentially market-altering exercise in massive scale and competitive clout, Walmart has linked up with insurance heavyweight Humana to launch what it says will be the lowest-cost prescription drug plan for seniors who rely on Medicare Part D prescription drug coverage.


Both companies now are enrolling Medicare beneficiaries in the Humana Walmart-Preferred Rx Plan, which was announced Sept. 30. The plan will begin covering patients around the country as a government-approved Medicare prescription drug plan in January 2011, offering monthly premiums at the rock-bottom rate of $14.80.


That’s less than half the average national monthly premium set by prescription drug plans serving Part D, Walmart and Humana officials asserted, and is the lowest national plan premium in 2011 for a stand-alone Medicare Part D plan premium offered in all 50 states and Washington, D.C., according to the Centers for Medicare and Medicaid Services.


Compounding the low-price appeal: a promise from Walmart that plan members who have their scripts filled at a Walmart, Neighborhood Market or Sam’s Club pharmacy could see co-payments as low as $2 on some generic prescriptions. 


Therein lies the rub for Walmart’s competitors, of course. The plan gives preferred status to Walmart’s own 4,000-plus pharmacies.


“This new co-branded prescription drug plan,” the two firms asserted in a joint statement, “can save a typical Medicare Part D beneficiary who enrolls in the Humana Walmart-Preferred Rx Plan an estimated average of more than $450 in 2011 on plan premiums and prescription medication co-payments and cost-shares, when compared with the average total costs for a Part D prescription drug plan in 2010.”


If successful, Humana Walmart-Preferred Rx will roil the Medicare market for medicines by blending the drawing power and geographic penetration of the nation’s fourth-largest pharmacy retailer with the massive enrollment muscle of one of America’s leading insurers.


Like Walmart’s much-copied $4 generic drug promotion did when it rampaged through the U.S. pharmacy market in late 2006 and early 2007, the new offering is generating plenty of attention from the press and from consumers. And John Agwunobi, president of Walmart’s health-and-wellness division, made no secret of the company’s long-term vision for its alliance with Humana. He acknowledged that the rollout of Humana Walmart-Preferred Rx “is intended to grow our business.”


The launch also extends an alliance between Walmart and Humana that dates back to the inception of Medicare Part D in early 2006, when the two firms partnered in an educational campaign for seniors. When the new drug coverage program got under way, informational kiosks staffed by Humana employees became a familiar sight at Walmart stores, alerting Medicare beneficiaries of their options under Part D and of the pharmacy services available through a co-branded Walmart-Humana prescription insurance card.


The new plan’s appeal to nervous seniors on fixed incomes is undeniably real — particularly in the wake of the nation’s most grueling economic tailspin in seven decades. And for Walmart — which proved adept at scrambling the prescription drug market when it launched $4 generics four years ago — the timing could hardly be better, as Americans continue to grapple with joblessness, steadily rising healthcare premiums and worries about the future.

keyboard_arrow_downCOMMENTS

Leave a Reply

Anna90 says:
Jun-25-2012 02:33 am

Well, with regular developing of the pharmacy market new services appears, so drug store operators and independent pharmacy owners try to make new changes into the market to make their business more profitable and available for consumers.To my mind,medical industry is one of the most expensive, medicines cost enough money ad sometimes people are forced to borrow money to buy the medicines they need, so considering this fact providing low prices can be really postive for consumers and make purchasng medicines more affordable for them. http://cashadvancesus.com/

TRENDING STORIES

Polls

Which area of the industry do you think Amazon's entry would shake up the most?
PHARMACY

TIAS broadens Rx automation portfolio

BY Jim Frederick

KANSAS CITY, Mo. — Building up its automated packaging capabilities for high-output pharmacies, Tension International Automation Solutions has acquired the exclusive rights to Maverick Enterprise’s automation technology.


The agreement includes Maverick’s UPM Tote and BottlePacker systems, along with the company’s Single BottlePacker and ErgoPack packaging technologies. TIAS also will take over service and support for Maverick’s existing automation systems.


A division of Tension Envelope, TIAS specializes in developing scalable systems for central-fill, mail-order and specialty pharmacies. The addition of Maverick’s capabilities in packaging automation, said sales and marketing chief Ken Myers, will beef up its automation support arsenal for high-volume pharmacy customers.


“This technology allows us to help central-fill, mail-order and specialty pharmacies [and] further automate with industry-proven equipment,” he said.


The result, Myers added, will be “reducing staffing and prescription costs while consistently driving down the potential for errors through bar code, RFID and UV verification systems.”


Added Robert Terzini, TIAS’ new head of pharmacy design and engineering, “Many of our customers have had these systems operating for a number of years. They have made their own modifications and have very good ideas as to how they would like to enhance them.”


Terzini, an experienced design engineer with expertise in pharmaceutical dispensing systems and packaging, joined the company in November after serving as chief technical officer of United States Pharmaceutical Distributors.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Which area of the industry do you think Amazon's entry would shake up the most?
PHARMACY

Q&A: Central-fill Innovation — Doyle Jensen, 
Innovation Associates

BY DSN STAFF

Sometimes shifting trends in business, society or technology can seem to crystallize, giving business leaders who are paying attention a clear view of a market’s future direction and forcing a fundamental realignment of their companies’ strategy. Such was the case four years ago for Innovation Associates, a leading pharmacy technology provider and the company behind the PharmAssist robotic automation system.

Innovation’s adaptation began roughly four years ago, when company leaders realized that the market for robotic dispensing systems at the retail pharmacy level had reached the point of near saturation. Both Innovation and the chain pharmacy retailers it dealt with began to realize that it made far more sense to invest the big bucks for robotic dispensing systems in a more cost-effective way: via centralized filling “hubs” that would offload the mechanics of prescription filling for many maintenance and high-use medicines.

In response, Innovation shifted its focus to helping pharmacy operators set up and automate their own off-site dispensing hubs, where their investments in pharmacy automation could be spread over a wider base of stores. In November, Drug Store News spoke with Doyle Jensen, EVP sales and marketing for Innovation and one of the architects of the company’s new strategy.

Drug Store News: First, give us a little history of the company and what led to the change in your business model.

Doyle Jensen: We were founded in 1974 as an engineering company … in aerospace and other high-tech projects. The pharmacy applications began in 1993, when we were involved in the Las Vegas Medco [Health] facility. We launched exclusively into pharmacy in 1997, and unveiled our first retail pharmacy automation product at the NACDS [Pharmacy and Automation Conference]. In 2005, we entered the high-volume arena, building a number of central-fill facilities for the U.S. Air Force.

I joined the company four years ago, and … we began to step back and strategically look at the market to see where it was going and how we should position ourselves. We saw a shift away from robotic installations at retail stores in the chain space.

DSN: How did this strategic revamp change the way you approached the pharmacy automation market?

Jensen: We invested heavily in high-volume systems. And we’ve done a lot of groundbreaking work for a lot of new customers. The market has changed. Four years ago, we looked at it and realized that if we’re just in retail robotics, we’re going to be out of business at some point, because there’s not going to be enough business to support one company, let alone four.

There’s not one retail chain among the top 20 in the United States that has an open [request for proposal] for robotic placements at retail. We saw the chains looking for higher returns on their technology investment and trying to reduce their fixed costs per prescription. Most chains today are at least in the process of evaluating central fill — if they’re not already contracting, constructing or expanding their existing facilities.

DSN: So how should a chain approach this for the best return for its pharmacy automation investment?

Jensen: When you look at deploying technology, you have to look at your fixed cost per script. And when you move to a high-volume, central-fill model, you have a direct effect on that fixed cost, because the technology can be leveraged across such a broader population of prescriptions. When you process a prescription in a robot at a pharmacy, you’ve got a pretty large expenditure and investment sitting in that pharmacy that is going underutilized. For example, our retail robots can fill 240 prescriptions an hour. How many pharmacy chains do you know that do 240 scripts an hour in one store?

DSN: How much impact on dispensing costs can chains realize by shifting to centralized script processing and by investing their big technology bucks there?

Jensen: An efficiently run central fill can lower the labor cost per prescription to below a dollar. We see a labor cost between 30 cents and 70 cents per prescription. The total loaded cost, including capital, transportation of prescriptions to store and other variables can be $1.80 to $2.50 per prescription.

DSN: That obviously depends on how many stores the hub pharmacy is servicing.

Jensen: Exactly. And the lower end of that cost scale is with the higher-volume central-fill facility. We designed a system for a chain earlier this year — a very large facility, with 100,000-plus prescriptions filled per day — that had some of the lowest cost variables I’ve ever seen. Honestly, the labor cost [per script] was a quarter.

DSN: What about other costs like transportation?

Jensen: Your transportation costs generally can be consolidated with existing routes through your wholesaler — or you can piggyback on your existing distribution facilities and network. You’re seeing your stores — or your distributor is seeing your stores — on a regular schedule already. You may have to augment that schedule with a daily delivery because you’re going to have to have that. But different chains have approached that with different models.

DSN: Besides the obvious benefit — lowering per-script costs — what else does off-site dispensing bring to the chain?

Jensen: It’s minimizing loss and waste, and inventory carry. In both of those areas, seldom-used inventory would be carried at the central-fill facility. Secondly, many meds today may not be commonly carried items. So the pharmacist fills a prescription for, say, 20 tablets out of a bottle of 100, and prior to ever getting another prescription from a patient for that rarely prescribed med, the bottle expires on the shelf.

DSN: That’s probably a fairly common occurrence.

Jensen: It happens quite a lot. And there are other areas of waste: for instance, for a script written [dispense as written] for a specific brand. One pharmacy exec told me … there’s millions of dollars wasted every year across [his] chain just in specific brand requests. You have thousands of these bottles sitting on the pharmacy shelves, and when they hit their expiration date, they’re done.

DSN: So you’ve got inventory just ticking away toward expiration at store level.

Jensen: The amount of inventory just sitting across hundreds or thousands of stores, versus just at central points, can mean you can do your order turns so much tighter. You won’t have to carry 1,000-count bottles in 1,000 pharmacies. You can decrease that to, say, 100 pills per pharmacy, and carry the bulk of those prescriptions at the central site. And you can set up just-in-time inventory, because you know what your cycles are on a daily basis.

DSN: This also could make it more feasible for a chain to get into specialty pharmacy. It’s a more efficient use of inventory dollars.

Jensen: Exactly. It allows the chain an effective expense model to get into specialty. [The chain] can enter that high-profit business by only carrying those meds at one point, whereas if it carried them in its stores, it’s way too much inventory cost.

DSN: Is there a way for independents to compete in this model?

Jensen: The wholesaler model is changing drastically, … [and at least one major wholesaler has] built a central fill and will offer that service to the independent pharmacies it supplies drugs to. Also, an independent that has multiple stores can employ this model in a smaller format, where you make one store your central fill for refills and distribute those out to other locations, and only buy technology for one location. Or could an independent collaborate with other independents in its trade area? Either way, it’s spreading the cost over a number of stores.

DSN: Are there interim steps a smaller chain or independent can take at this point to upgrade its automation, short of adopting central fill?

Jensen: The other area of growth is in semi-automated technology. You do have chains that are actively investigating and deploying … semi-automated pharmacy technology. It’s low cost [and] low-footprint, the ROI model is easier to obtain and it’s generally complementary to a central-fill operation.

DSN: Does Innovation have a product to fill that niche?

Jensen: Smart Cabinet was our entry to the market in 1997. Now we have a next-generation model. It’s basically the same size and cost, but it’s been technologically upgraded, with larger user interface [and] easier workflow process; we listened to our customers and made some modifications. It’s basically [automating dispensing for] your top 50 movers, which generally comprise about 31% of your daily prescription fills in a pharmacy. So it’s a tight formulary for your fastest movers.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Which area of the industry do you think Amazon's entry would shake up the most?