Saturday, August 29, 2009

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.

Originally posted at Carpe Diem.


At 8/29/2009 1:30 PM, Anonymous Anonymous said...

While this may indeed save the corporation significant money on prescription drugs, it remains to be seen how employees and retirees with specific critical drug needs fare.

It would seem very easy for both the corporation and drugstore to just fail to agree on a price for a specific drug, and just not cover it, with no great negative impact for either. It would also seem that the dollar advantage for terminating a given employee with an expensive prescription drug requirement would be much greater and more direct than for a more mediated insurance relationship.

Regards, Don Lloyd

At 8/29/2009 1:35 PM, Blogger sethstorm said...

Anonymous @ 8/29/2009 1:30 PM

They won't be terminated for that, they'll be terminated for an otherwise minor and tolerated policy violation.

At 8/29/2009 1:44 PM, Blogger Shawn said...

further reason to remove tax benefits to company-provided health insurance. once individuals purchase their *own* health insurance, (and there's some inter-state competition), LOTS of problems go away.

At 8/29/2009 1:45 PM, Blogger juandos said...

"They won't be terminated for that, they'll be terminated for an otherwise minor and tolerated policy violation"...

Oh yeah?!?! You got a credible source for that information or are you just making it up as you go?

At 8/29/2009 6:29 PM, Anonymous Anonymous said...

Implied in this is that the pharma supply chain is full of money sinks. It is clear that much of medical device supply is the same. Walmart started squeezing, and if you think about it this is an attempt to avoid the corner drug store being disintermediated away. For routine long term prescriptions the mail order route and the blister pack make sense and eliminate the unneeded pharmacist and local store which just add costs. Of course the local stores will holler about this creative destruction just like other stores did.


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