Deb:
Looks like you had a little bit of a negative comment, perhaps I can be both civil and explain.
First there is large difference between what one pays for a service and what it costs. Lets look at a common occurrence in my area, where a doctors visit cost around $100.00. It is common in my area for a plan to require a person to pay $20.00 per visit to a doctor. The plan then pays the doctor the remainder 100-20 = 80 - a network write down = the final payment. In my area the insurance plan pays about $60 for a doctors visit. The person who got the service paid $20.00 the insurance paid $60.00 and the doctor wrote off $20.00 because she was part of a network that steered patients to her. Still the cost was $80.00 before the doctor write off, but the patient paid $20.00. Again a difference in what the patient paid as opposed to what it cost.
Now lets look at drugs. A drug costs x amount. I do not know what byetta costs but lets say it is $200.00. The retail markup (it is very understandable) may be $50.00. The markup has to fund transport, labor, store costs, profit, sales, as well as the cost of the drug. Again this an example so lets not get upset about the example.
Now the plan then has to make a choice about how it will deliver the drug. Two familiar ways it can be done is mail order or at the retail level. A mail order company will often tell an insurance company they can deliver the byetta for $200.00. This workers because they work closer to the manufacturer, they do not have a retail store and they may actually get the drug for a discount from the manufacturer. Whatever the reason the mail order firm is usually a tad cheaper on most items.
Now your plan has the next decision to make. They can do one of three things. First they can underwrite the cost of the drugs for one type of provider or the other, they can pass the cost on as is, or they can charge more for one option or another. The third option is seldom if ever used.
But the plan sponsor or employer may see its future cost structures as going down if it can influence patients into a mail order provider. Thus the plan provider may say ok, we will not subsidize a retail pharmacy, but because we want people to use mail order we will subsidize mail order. or maybe they want to subsidize mail order more than retail. (the second is more common) or they may say no we want to subsidize retail over mail order.
In my area a typical plan will allow a mail order customer to purchase three month prescriptions for the cost of two months. Then they restrict retail purchases to one per month. So there are two incentives for the patient to use mail order. First it is one third cheaper, second you do not have to go to the pharmacy three times for the same supply.
Whatever the incentive offer the cost is the same. lets take my fake byetta example. Lets say the cost of a month of mail order is $200.00 or $600 for three months. Now lets look at how the drug plan might pay.
First in my area you get three months for the cost of two, so immediately it goes down to $400.00 for three months. Then typically in my area the insurance company pays 80% of the cost or $320.00 plus the $200.00 charged for the third month free equals an employer cost of $520.00. Leaving the patient to pay $80.00 for a three month supply.
Now lets say typically in my area if the retail cost of the Byetta is $250.00 then the three month cost would be $750.00, there is no write down to the patient for useing retail so the cost breaks down as follows: Insurance plan will pay $600.00 patient $150.00.
So the patient choice to purchase retail cost the plan $80.00. In addition it cost the patient an additional $80.00 That is an expensive choice. Well the plan sponsor may say wait lets give a bigger incentive to use mail order. Suppose we take that extra $80.00 that we would pay on a retail purchase and give further incentives to the patient. Usually they would do that by splitting the advantage of mail order. So the plan now pays 80% plus $40.00 for toward the cost of the mail order drug. So a patient orders the drug by mail order, So the patient pays 20% of two months minus $40.00 or the patient pays $40.00 for three months.
The plan now pays $560.00 for three months. Which is still $40.00 less than what the plan example pays at the retail level. But now the patient is paying $40.00 for a mail order script as opposed to $150.00 for the retail pharmacy. Now you have a serious reason to select mail order.
Notice however the prices remain the same. The byetta still costs $200.00, the local pharmacy is still well within reason to charge dollars for the store, labor, transport etc. and the mail order company by operating close to the manufacturer still provides a lower cost alternative.
Now what did you the patient give up. First you gave up on demand pick up. Mail order costs time. Second you gave up a local pharmacist, those folks are very valuable, finally you gave up one to one service. At my local pharmacy, they call me when I am getting low or need a new script. I do not have to call them. Local pharmacies have more overhead, but it is really overhead most customers use.
I hope this long explanation helps out.
Rick
