Markets in Everything: Direct Purchase of Drugs
WSJ -- Walgreen Co. will offer prescription drugs directly to Caterpillar Inc. for workers and retirees starting Jan. 1, expanding an unusual approach to cutting corporate health-care costs and improving efficiency.
When Caterpillar is buying drugs, the agreements will allow it to bypass pharmacy benefits managers, or PBMs, the managed-care companies that most large employers use to administer prescription-drug programs for employees. Caterpillar will negotiate pricing directly with Wal-Mart and Walgreen instead of paying a PBM to handle that part of the business. Savings will come through lower prescription drug costs for Caterpillar.
The Caterpillar approach, which comes at a time of heightened uncertainty about the future of health care in the U.S., could serve as a template for other large companies to manage their drug plans in more cost-effective and transparent ways.
MP: Another example of how competitive market forces, not government intervention, result in lower health care costs.