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November 29, 2006

DIYS Pharmacy Benefits Management

The Democrats have promised to repeal the portion of Medicare law which prohibits the federal government from negotiating the cost of prescription drugs with drug companies.  Republicans prefer the current elaborate system of private insurers and outsourced benefit management. They’re both wrong; there’s a much simpler solution available to reducing drug costs both to the drug takers and to the taxpayers.

Drug purchasers can be their own benefit managers.  We don’t need the feds to do this – can you imagine the litter of earmarked grants to establish drug warehouses, outlets, and bargaining units in the districts of committee chairman? We don’t need a bevy of overpaid middlemen adding cost to the middle of the supply chain either.  All we need is a way to shop and an incentive to spend time searching out lower prices. More on both below.

A company called BidRX is an example of how this might work. You go to their site, put in all your prescriptions, say how far you’re willing to travel to have them filled and whether you’ll take mail order, and you get back bids from qualified pharmacies that want to be your suppliers. Obviously depends on getting to a critical mass of participating pharmacies and patients but certainly sounds like a good idea. It’s free to the patients.  Since these are US pharmacies you’re getting the same FDA approved product whether you overpay for it or not so quality is not an issue. Perfect for an auction.

I’m going to try BidRX for our drugs so I’ll let you know how well it works. Results probably vary by location though.

Guess who else is bargaining with drug companies on our behalf: Wal-Mart.  The company politicians love to hate yesterday went completely national (except for North Dakota) with its program of a fixed $4.00 price for a 30 day supply of over 300 generic drugs which their press release says include 14 of the 20 top prescribed drugs in the United States. Two catches:  STATE law in some states doesn’t allow such LOW prices (one more reason why we don’t want politicians doing this) and you have to go into the store to pick up the order. Don’t know if the latter restriction is because this program is a loss leader meant to get people into the store.

Competitor Target has responded with a $4.00 generic program of its own.

There isn’t going to be much fat left in drug prices if Wal-Mart and Target are buying and competing to resell.

In many cases four bucks is less than the co-pay you fork over even when your insurance company or Medicare is reimbursing you for the drugs.  But a fixed dollar co-pay is a dumb thing which takes away the incentive to find a drug bargain. This is something government can and should fix in Medicare and probably Medicaid as well.  Companies with health care benefits can also use a better incentive

Enlistees in drug insurance programs should be reimbursed a percentage of the prior year AVERAGE cost of the drugs they are buying. If they spend enough less, they’ll get to pocket the difference. Sounds weird until you think that we’re paying us to be benefit managers rather than paying somebody else or over-paying for the drugs. Of course, the average price and the cost of the drugs will go down year-over-year, at least for a while, but that’s the point of the whole program.

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