Seize MTM’s promise, new leaders urge
When Congress created the Medicare Part D drug benefit program as part of the Medicare Modernization Act of 2003, lawmakers acknowledged within the language of the bill that some elderly beneficiaries would require additional counseling about their often-complicated drug regimens, and additional oversight by a health professional of their long-term medication therapy.
By elevating the concept of Medication Therapy Management into law and calling for some level of reimbursement for that level of patient care, the U.S. government effectively endorsed a message that pharmacy leaders have been pushing out to the nation’s health plan sponsors, pharmacy benefit managers and patients for years. The message: that pharmacy services like disease management, clinical oversight and patient education go way beyond drug dispensing, and as such deserve compensation.
That’s all to the good. But Congress left many aspects of MTM vague when it mandated that the Centers for Medicare & Medicaid Services implement the program as part of the Part D package of benefits. In turn, CMS left many aspects of the program up to the hundreds of prescription drug plans administering Part D—including which seniors qualify for the additional counseling and monitoring, who actually delivers it to those patients, and how it’s paid for.
It’s up to the pharmacy community to step firmly into the breach. MTM could represent one of the greatest opportunities still left to community pharmacies to prove their worth as front-line, fully qualified and patient-focused health care practitioners, rather than just dispensers of pharmaceutical products. But, as pharmacy’s leaders have warned repeatedly over the past year, the profession must step up quickly and decisively with a bold and thoughtful plan for delivering MTM—or some other group of health professionals will.
Indeed, some PBM-owned Medicare Part D plans appear to show little interest in enlisting retail pharmacies within their plan provider networks in their still-evolving MTM service models, opting instead for the services of nurses, HMO or PBM staff pharmacists or other professionals.
Somebody will be delivering MTM services to millions of Medicare patients,” said one Rite Aid pharmacy executive. “Let’s be certain it’s community pharmacists.
“I urge all pharmacy opera-tors…to develop MTM programs with a ‘build it, and they will come’ approach. If we don’t, in a few years we will look back and realize we missed a major patient-care opportunity,” he added.
“One of our primary challenges with the Medicare Modernization Act is that it stated that MTM services can be delivered by pharmacists—and ‘others.’ It could be stated that MTM services can be delivered by pharmacists—and ‘others.’ It could be doctors or nurses, or it could be some faceless voice over the telephone from a call center in another part of the world,” warned Bruce Roberts, executive vice president and chief executive officer of the National Community Pharmacists Association. “That’s no way to deliver patient care.”
Addressing NCPA members at the group’s last annual meeting, Roberts passed along a warning from Mark McClellan, former administrator of the Centers for Medicare & Medicaid Services. “Shortly after the passage of MMA,” Roberts noted, “Mark McClellan said to me: ‘If pharmacy wants to be paid for services, you better develop a systemized way to deliver MTM and be able to clearly demonstrate the outcomes of your efforts.’ I’ll never forget those words.”
The challenge, said Roberts, “is to demonstrate that community pharmacists are ready, willing, and able to deliver medication therapy management, that face-to-face MTM is dramatically superior to any cut-rate alternative, and that we can and will produce better outcomes for the plan and our patients.”
Equally important, said the group’s chief executive officer, is that any successful pharmacy-based MTM program has to “recognize the reality of the community pharmacy setting: busy pharmacies, busy pharmacists, workflow issues.”
Chain and independent operators nationwide are scrambling to establish at least some their pharmacies as MTM destinations and stake a claim in the emerging field before other groups pre-empt the initiative. And, within the dictates of their busy dispensing workflow requirements, they continue to push their own pharmacists into broader roles as clinical care specialists and members of a broader health team.
The effort to deliver on the MTM promise at the retail pharmacy can’t be made in a vacuum. “Community pharmacists must be integrated into physician and consumer e-Health initiatives if we are going to reduce administrative costs and improve the quality of care delivered,” said Donald Hackett, chief executive officer of Community MTM Services, which was organized by NCPA as a Web-driven communications and information toolkit to help pharmacists provide MTM and other patient-care services. Big chains like Walgreens and CVS, both of which are emerging as power players in pharmacy benefit management with their own PBM operations, may be best-positioned to capture and define the delivery of MTM services to their own patients.
Walgreens, for instance, has developed an MTM program though its PBM subsidiary, Walgreens Health Initiatives, aimed at the patients enrolled in WHI who are most in need of the additional clinical services. Those patients account for just 5 percent of WHI’s total membership but 29 percent of total prescription costs for their health plan sponsors, according to new company research.
By focusing on those high-cost patients, WHI’s MTM program produced a client return on investment of 2.5-to-1 for MTM interventions throughout 2006, Walgreens reported recently. Pharmacy savings shared between members and clients were more than $50 per member per month for members receiving interventions, according to Walgreens.
“MTM is proving to be a valuable program for creating better patient therapeutic outcomes while also controlling overall healthcare costs,” said Jim Langman, vice president of clinical services for WHI. “By combining our…technology and clinical expertise, our MTM program creates true coordination of care for patients with complex pharmaceutical needs.”
Grocer sings new tune in community involvement
Meijer is taking another step in community relations, to the tune of promoting and selling CDs of local musicians.
The Michigan-based 176-unit grocery chain launched the Outside the Mainstream promotion in February with a solo CD from Josh Davis, a singer from Lansing, Mich., whose Fool Rooster CD was recognized by Performing Songwriter magazine for its lyric.
Each month, the chain is featuring a new performer in its circulars, which are sent weekly to 7 million households in Ohio, Michigan, Illinois, Indiana and Kentucky, according to company vice president of public affairs Stacie Behler. Meijer purchases 1,000 of the artist’s CDs and offers them for sale in all the chain’s stores for $7.49.
“The goal of the program is to bring some of the talent that we find in our own backyards to a wider audience than they can normally reach by themselves,” Behler said. “And by supporting this with a low price and a feature in our circular, hopefully it will lead people to gamble on the purchase of music that is worthy of discovery.”
Meijer, according to Behler, is trying to create regional loyalty to its stores by promoting local talent.
CDs chosen for promotion, according to the chain, must have a UPC and be professionally duplicated. Submitted CDs are sorted according to state and chosen on the basis of whatever state will be featured that month and how different the music is from the previous month.
Featured in April is Michigan-based Potato Moon with its CD “The Life of The Lonely Jones.”
CVS wins Caremark battles
WOONSOCKET, R.I. —The battle for Caremark Rx has finally come to an end. And, to the dismay of Express Scripts, CVS has emerged the winner, creating a $75 billion pharmacy benefit management powerhouse that is likely to serve as a benchmark for additional mergers within the industry.
“CVS/Caremark will offer end-to-end services, from plan design to prescription fulfillment, as well as the opportunity to improve clinical outcomes, which will result in better control over health care costs for employers and plan providers,” stated Tom Ryan, president and chief executive officer of CVS/Caremark, late last month when the deal closed. “The company will improve the delivery of pharmacy services and health care decision-making, enabling consumers to benefit from unparalleled access, greater convenience and more choice.”
With the close of the transaction—ultimately valued at $27 billion—CVS/Caremark has moved into a strong, competitive position. The combined company will be No. 1 in pharmacy sales, PBM-managed lives, specialty pharmacy sales and retail-based health clinics. It will be No. 2 in mail services.
That adds up to a lot of extra leverage for the retail health care juggernaut with suppliers, as well as insurers and payers.
In terms of synergies, CVS expects to realize between $800 million to $1 billion in revenue synergies in 2008, and significantly more thereafter. The company expects about $500 million in cost savings, largely related to better purchasing.
“We would like to note that every deal that both CVS and Caremark have done historically has yielded synergies significantly in excess of original guidance,” stated Citigroup analyst Deborah Weinswig in a recent research note. “We believe this deal will be no exception.”
Charles Boorady, also of Citigroup, believes that if the company achieves cost savings from the drug-procurement process, it likely will come from a combination of the following: manufacturers accepting the lower price or offering greater rebates, the wholesalers and distributors accepting lower prices and manufacturers bypassing the wholesalers and selling directly to the combined CVS/Caremark entity.
While many industry observers view the merger as a boon for the companies, it undoubtedly will have major implications on the industry, in general, as vertical integration is a new paradigm that—if successful—could clear the way for more mergers moving forward, with Medco and Express Scripts likely being the next targets.
“The fragmentation in the past may be the reason why vertical integration did not work, but the sheer scale of the CVS/Caremark company may be able to make it work,” Boorady said. “The only test will be whether customers buy into the concept or the concerns over the perceived channel conflict will outweigh it.”
Either way, Boorady sees it as a win-win for rival PBMs. “I see Medco and Express Scripts winning either way. If this integration works, they are likely to be the ones that are acquired next. If it doesn’t work then they could stand to gain customers that prefer a standalone [PBM] instead of a vertically integrated model.”
Another issue such a deal brings to the forefront is network restriction. If customers are willing to restrict the retail pharmacy so that employees can get their prescriptions filled at a single chain, or just a few chains in the market, then it will make the synergy from a vertical integration more obvious, according to Boorady.
However, this has been a concern for several years and has yet to materialize.
“I think most employers have concluded, and will continue to conclude, that the sheer hassle factor that you are putting on your employees by making them go to a CVS instead of a Walgreens, or vice versa, isn’t really worth what little savings you can get relative to other things you can do that present less of a hassle to the employee but can save a lot more money,” Boorady said.
However, prior to the deal, CVS Pharmacare controlled a provider network of more than 56,000 retail pharmacies. Meanwhile, Caremark’s network numbered more than 60,000 retail pharmacies, so it is unlikely that the combined company, post-merger, would suddenly pull back the size of its network—particularly, if the end goal is to remain attractive to insurers and payers and competitive with stand-alone PBMs.
According to William Blair & Co. analyst Mark Miller, the combined company is facing its first big test as it expects an announcement on the large Federal Employee Program contract—currently up for negotiation—as early as May. Three years ago, Caremark won this contract from Medco and it is likely that the two PBMs, among others, will bid for this business aggressively.
“While there are many moving parts to these types of negotiations, this will be the first big test for the new CVS/Caremark, and may provide some incremental perspective on the current state of the competitive environment,” Miller stated in a research note.
In related news, CVS/Caremark has announced the members of the company’s board of directors. As previously disclosed, the 14-member board was evenly split among designees from CVS and Caremark.
Former Caremark chairman and chief executive officer Mac Crawford has been elected chairman of the board of the combined company. Ryan will continue to serve as president and chief executive officer.
The following individuals named to the board from CVS are:
Ryan, president and chief executive officer of CVS/Caremark Corp.
David W. Dorman, senior advisor and partner, Warburg Pincus LLC.
Marian L. Heard, president and chief executive officer, Oxen Hill Partners.
William H. Joyce, chairman and chief executive officer, Nalco Co.
Terrence Murray, former chairman and chief executive officer, FleetBoston Financial Corp.
Sheli Z. Rosenberg, former vice chairman, president and chief executive officer, Equity Group Investments LLC.
Richard J. Swift, former chairman, president and chief executive officer, Foster Wheeler Ltd.
The following individuals named to the board from Caremark are:
Mac Crawford, chairman of CVS/Caremark Corp.
Edwin M. Banks, founder, Washington Corner Capital Management LLC.
C. David Brown II, chairman, Broad and Cassel.
Kristen E. Gibney Williams, former executive of Caremark’s Prescription Benefits Management division.
Roger L. Headrick, managing general partner, HMCH Ventures; president and chief executive officer, ProtaTek International
Jean-Pierre Millon, former president and chief executive officer, PCS Health Systems
C.A. Lance Piccolo, chief executive officer of HealthPic Consultants