December 2006
Employee Benefit News
Any start-up company would be jealous of these numbers. In just over one year of being in business, pharmacy benefit manager Rite Aid Health Solutions has attracted enough clients to serve 100,000 lives and has received kudos for customer satisfaction.
But the Camp Hill, Pa.-based PBM is no ordinary start-up. Rite Aid Corp. once owned PCS Health Systems, which used to be the nation’s largest PBM, serving millions of health care consumers. Rite Aid sold off PCS in 2000 during a period of financial troubles, but kept its eye on the market for a chance to re-emerge. That opportunity came in 2005, when the company established Rite Aid Health Solutions, aiming mainly at the small to mid-sized employer market.
“So now we’re back,” says Greg Drew, vice president and general manager of Rite Aid Health Solutions. “We didn’t want to be out of the business, but it was necessary at the time. Rite Aid Corp. is very committed to the new PBM.”
Drew says Rite Aid Health Solutions holds itself to a high standard of transparency, both in terms of rebate revenue and network pricing.
“We disclose everything that the manufacturer gives us. [We do] all the stuff you would expect to see from any PBM,” says Drew. “What’s more, all our rebates are 100% pass-through, so we don’t have a motivating force to drive higher-cost drugs. Everything we do is incorporated into our administrative fees.”
In other words, Rite Aid Health Solutions makes its money from client administrative fees alone.
“That’s the model we’ve chosen to operate on, and it’s the one we can feel best about,” says Drew. “It doesn’t make sense to drive a higher-cost drug for a client, and we would not want to engage a client where we’d be doing that kind of thing because it would be contrary to our corporate culture almost a bit hypocritical.”
Some PBMs share rebate revenues with clients, but Drew frowns on that practice too: “The motivation needs to be to develop an effective solution for the plan without driving higher costs. It doesn’t do any good to get a couple of extra dollars per claim on a rebate if you’re driving the average cost per claim by $10.”
Rite Aid Health Solutions prides itself on being consultative to customers. Its clinical services include prior authorization, utilization review, and disease management. Many firms, particularly small businesses, have switched to Rite Aid Health Solutions as their PBM to gain access to these services, says Drew. Most small business clients have between 300 and 1,000 employees, while larger clients have up to 25,000.
Another way Rite Aid Health Solutions stands apart from the competition is in its pharmacy network pricing.
“Like everybody else, we guarantee average claim pricing,” says Drew. “[But] we actually pass through the actual claim costs. So the plan benefits if what is actually paid to the pharmacies is lower than the guaranteed cost. We don’t retain it. Most PBMs retain any savings that comes through beyond the network guarantee.”
Rite Aid Health Solutions is also pioneering a 90-day retail program for maintenance medications at select pharmacies. The PBM contracted with Rite Aid and other pharmacies to offer a “very aggressive” cost structure that rivals mail-order rates for a 90-day supply of prescription drugs, says Drew.
Whereas mail-order programs typically attract 20% of plan members, a 90-day retail program can draw a 45% participation rate, says Drew, because customer satisfaction is so much higher. Consumers want to keep a relationship with their local pharmacist, and they like being able to purchase their medications on the spot rather than waiting for a package to arrive in the mail.
Customer satisfaction is a high priority in the competitive PBM industry, where wooing clients away from other PBMs is a common growth strategy. In this arena, Rite Aid Health Solutions has an edge: Wilson Health Information, a healthcare consumer research company, found Rite Aid Health Solutions to be the top-rated PBM in customer satisfaction in its 2006 WilsonRx Pharmacy Benefit Satisfaction Report.
Rite Aid Health Solutions has a full national network of 55,000 pharmacies, enabling the PBM to serve large clients with a far-flung work force. Rite Aid Corp.’s own network will mushroom to more than 5,000 stores in the first quarter of 2007, when the company’s acquisition of the Eckerd and Brooks pharmacy chains is expected to close.
