Comparison of Costs of Community and Mail Service Pharmacy
Objective: To compare the costs of prescriptions dispensed through mail service and community pharmacies to quantify the comparative costs of the two types of pharmacies.
Design: Modeling study based on 1-year of claims data from a cohort of patients.
Setting: A health plan in the northeastern United States.
Patients: Approximately 100,000 members of the health plan.
Intervention: The plan used a small pharmacy benefits manager (PBM) and a mail service pharmacy that was not owned by a major PBM, a three-tier benefit design, and specified that patients could get a 90-day supply through mail service for the equivalent of two 30-day community pharmacy copayments.
Main Outcome Measures: Actual total, ingredient, plan, and patient costs of prescriptions dispensed through a mail service pharmacy and the estimated costs of those same prescriptions at community pharmacies.
Results: Total costs for the 44,847 prescriptions dispensed through mail service were $6,401,624. Had these prescriptions been dispensed at community pharmacies, costs would have been $6,902,252. Ingredient costs were $6,401,624 through mail versus $6,633,170 at community pharmacies. Total costs to the health plan were $4,726,637 through mail versus $4,417,733 at community pharmacies. Member costs were $1,674,987 through mail versus $2,484,519 at community pharmacies.
Conclusion: Compared with community pharmacies, the mail service pharmacy was less expensive overall, less expensive for patients, but more expensive to the health plan. From the health plan's perspective, the loss of copayments in the mail service benefit was greater than the savings on ingredient costs and dispensing fees.
Expenditures on prescription drugs in noninstitutionalized settings have grown from $40.3 billion in 1990 to $141 billion in 2001. Health plans, which now pay for more than 70% of prescriptions dispensed, have increasingly turned to mail service pharmacies as one means of controlling prescription drug spending. As a result, the percentage of total U.S. prescription sales made through mail service pharmacies grew from 5.1% in 1990 to 14.1% in 2002.
Mail service pharmacies offer the potential for cost savings for chronic medications on both ingredient costs and dispensing fees. Mail service pharmacies may be able to fill prescriptions at lower costs, and thereby lower dispensing fees, because of efficiencies of operation. Most mail service pharmacies are high volume, highly automated operations. Mail service pharmacists may also be more efficient because they are not subject to interruptions from telephone calls and patients' questions as are community pharmacists. In addition, mail service plans typically dispense 3-month supplies of medications. Community pharmacies are usually limited to dispensing 1-month supplies. Because the pharmacy charges the pharmacy benefits manager (PBM) a set dispensing fee each time a prescription is filled, dispensing a greater months' supply minimizes the total number of prescriptions dispensed and, consequently, the total amount paid by the sponsor for dispensing fees. Mail service pharmacies may also be able to lower ingredient costs because they receive larger product discounts from manufacturers than do community pharmacies.
Mail service pharmacies can provide lower unit costs for prescriptions, but this does not necessarily mean that health plans actually realize lower costs by using mail service pharmacies. Health plans typically provide patients with economic incentives to use mail service pharmacies. These incentives most commonly consist of allowing patients to receive a 3-month supply of medication from the mail service pharmacy for the price of 2 monthly copayments. To receive an equivalent supply of medication from the community pharmacy, the patient would have to pay 3 monthly copayments. When copayments averaged $5-$10 a month, the loss of one copayment on a 90-day supply of medication was not a major economic concern for health plans. However, with copayments now averaging $15-$20 per 30 day supply, and growing annually, the loss of one copayment per 90-day mail service prescription has become a major cost to health plans. As a result, the economic incentive for health plans to use mail service pharmacies has been reduced.
Objective: To compare the costs of prescriptions dispensed through mail service and community pharmacies to quantify the comparative costs of the two types of pharmacies.
Design: Modeling study based on 1-year of claims data from a cohort of patients.
Setting: A health plan in the northeastern United States.
Patients: Approximately 100,000 members of the health plan.
Intervention: The plan used a small pharmacy benefits manager (PBM) and a mail service pharmacy that was not owned by a major PBM, a three-tier benefit design, and specified that patients could get a 90-day supply through mail service for the equivalent of two 30-day community pharmacy copayments.
Main Outcome Measures: Actual total, ingredient, plan, and patient costs of prescriptions dispensed through a mail service pharmacy and the estimated costs of those same prescriptions at community pharmacies.
Results: Total costs for the 44,847 prescriptions dispensed through mail service were $6,401,624. Had these prescriptions been dispensed at community pharmacies, costs would have been $6,902,252. Ingredient costs were $6,401,624 through mail versus $6,633,170 at community pharmacies. Total costs to the health plan were $4,726,637 through mail versus $4,417,733 at community pharmacies. Member costs were $1,674,987 through mail versus $2,484,519 at community pharmacies.
Conclusion: Compared with community pharmacies, the mail service pharmacy was less expensive overall, less expensive for patients, but more expensive to the health plan. From the health plan's perspective, the loss of copayments in the mail service benefit was greater than the savings on ingredient costs and dispensing fees.
Expenditures on prescription drugs in noninstitutionalized settings have grown from $40.3 billion in 1990 to $141 billion in 2001. Health plans, which now pay for more than 70% of prescriptions dispensed, have increasingly turned to mail service pharmacies as one means of controlling prescription drug spending. As a result, the percentage of total U.S. prescription sales made through mail service pharmacies grew from 5.1% in 1990 to 14.1% in 2002.
Mail service pharmacies offer the potential for cost savings for chronic medications on both ingredient costs and dispensing fees. Mail service pharmacies may be able to fill prescriptions at lower costs, and thereby lower dispensing fees, because of efficiencies of operation. Most mail service pharmacies are high volume, highly automated operations. Mail service pharmacists may also be more efficient because they are not subject to interruptions from telephone calls and patients' questions as are community pharmacists. In addition, mail service plans typically dispense 3-month supplies of medications. Community pharmacies are usually limited to dispensing 1-month supplies. Because the pharmacy charges the pharmacy benefits manager (PBM) a set dispensing fee each time a prescription is filled, dispensing a greater months' supply minimizes the total number of prescriptions dispensed and, consequently, the total amount paid by the sponsor for dispensing fees. Mail service pharmacies may also be able to lower ingredient costs because they receive larger product discounts from manufacturers than do community pharmacies.
Mail service pharmacies can provide lower unit costs for prescriptions, but this does not necessarily mean that health plans actually realize lower costs by using mail service pharmacies. Health plans typically provide patients with economic incentives to use mail service pharmacies. These incentives most commonly consist of allowing patients to receive a 3-month supply of medication from the mail service pharmacy for the price of 2 monthly copayments. To receive an equivalent supply of medication from the community pharmacy, the patient would have to pay 3 monthly copayments. When copayments averaged $5-$10 a month, the loss of one copayment on a 90-day supply of medication was not a major economic concern for health plans. However, with copayments now averaging $15-$20 per 30 day supply, and growing annually, the loss of one copayment per 90-day mail service prescription has become a major cost to health plans. As a result, the economic incentive for health plans to use mail service pharmacies has been reduced.