August 1, 2006
Walgreens and CVS take on Insurance Companies
Walgreens and CVS have stopped accepting prescriptions covered by some insurance companies over the amount the insurers are willing to pay for medicines.
Consumers, of course, are caught in the middle of this test of wills.
Frank Ascione, dean of the University of Michigan’s College of Pharmacy, told The Detroit News, “You’re going to have these folks battling it out more and more as we get more chains and they get more and more power. It could be very detrimental.”
The growing clout of major chains such as Walgreens and CVS has enabled these companies and other pharmacies to draw a line in the sand in dealing with insurers they deem unreasonable.
“Stores aren’t required by law to take every insurance plan out there,” said Michelle McKenna, spokesperson for the National Association of Chain Drugstores (NACDS). “It all comes down to a business decision.”
The decision for many pharmacies is quite easy. The demands of a small number of insurance providers can not be met and turning away from their business is seen as the best course of action.
In a case involving Walgreens and Midwest Health Plan, the drugstore chain wanted at least $8.99 to fill each prescription. The company said a lower amount demanded by Midwest did not account for its full costs including filling and delivering prescriptions and other services such as 24-hour operations, drive-through windows and customized label printing in 14 separate languages.
Discussion Questions: Where do you see the relationship between pharmacies and third-party insurers going? What will this mean for how pharmacies conduct
their business?
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This is just the next step in the battle that started with mandatory 90 day mail order Rx fills. With the PBM’s trying to squeeze the Retail Pharmacy Chains for every possible cent – this is to be expected and indeed commended.
The innovations and benefits provided by the large Pharmacy chains like multi-lingual Pharmacists and multi-language Rx labels, 24 hour stores, patient counseling, help in selecting MED D Plans etc. justify the market share they command. The PBM’s, while looking to maximize their earnings, should not be seeking to shortchange the customer by denying access to the leading pharmacies of the area.
All in all – I see this happening more often in the near future before things improve.
Drug stores are third party captives. Without insurance plans, Medicare, and Medicaid, where would the drug store business be? Would the huge chain drug store location growth have taken place? There’s a lot of controversy about the “true” dispensing cost (dispensing cost does not include the actual drug itself) versus the reimbursement. Studies cannot agree on the “true” cost. Various study conclusions range from $6.10 to $11.27. California Medicaid pays $3.50, while Texas Medicaid pays $6.42. See this for more information.
So why should an insurer pay more than Medicaid? And given spiraling medical costs, won’t reimbursement allowances decline?
What’s developing is pretty much the same relationship that insurance companies have with doctors, laboratories and other segments of the medical profession — an adversarial one. However, when pharmacies or doctors get shorted, they simply raise the price to patients who are caught in the middle.
What’s needed is what was always needed — total and radical health care reform. And while were at it, let’s think about reinstating regulatory controls on the insurance industry. Because of the number of in-store pharmacies, I believe the supermarket industry can take the lead in this issue. It is affecting their bottom line and their customers.
The insurance companies are the biggest problem in the delivery of medical services. They make decisions based on criteria that are not verifiable what goods and services “should” cost and then tell the doctors, hospitals and pharmacist that that is all they will pay. Then the doctor or pharmacist sends a legitimate bill to the insurance company based upon the above cost. However, the insurance company often does not pay the doctor or pharmacist as the bills are submitted. They hold the bills until they reach a trigger point (say $20,000). Then they often offer the doctor a choice of receiving $10,000 now to settle the $20,000 bill or “paying when they get around to it.” If you doubt this take a few minutes and talk to any doctor. As a result of this “process” all cost for medical services go up. They go up to cover the increasing cost of doing buisness in an environment where insurance reimbursement controlls the majority of the cash flow. Do away with insurance and all cost will come down.
This is shaping up to be the Battle of the Titans. Who will bend first? On the one hand the insurance company needs the pharmacy to accept the insurance card. If not, the insurance company will have trouble getting consumers or companies to buy the plan. On the other hand, the pharmacy needs the insurance company to foot the bill for the prescriptions otherwise the consumer will go to the pharmacist who does accept the plan. And you think the Middle East is tough.
Could the insurance companies start to become a competitor of the pharmacies ala Cardinal Health? Could the pharmacies become competitors of the insurance companies and start collecting premiums for coverage? In a way, isn’t this starting to happen anyway? What is the future for the minute clinics? Don’t many insurance companies already accept direct fulfillment of ‘scripts?
When two giants battle, there is always a loser. I fear that in this case the potential loser will be the consumer. If battles like this keep going on the clamor for a total overhaul of our health system will come from both sides of the aisles in Congress. And we all know what happens when Congress gets involved. This power struggle needs to be rectified soon before it turns into a bigger mess.
Middlemen always increase costs. Accompanying the insurance companies, by preference or by necessity, are various layers of fourth-party providers such as ancillary brokers, analysts, investigators, and others. These are conveniently hidden, but still increase costs. In workers’ comp cases, another dollar-sucking layer is state governments.
No one understands this dynamic better than the big pharmacy chains. They are intimately familiar with all of the cost-creating sinkholes in the insurance industry. By refusing to accept certain plans, they are sending a signal to insurance companies to manage their costs better. De-regulation of insurance companies contributes to this phenomenon, and the big pharmacies are now taking it upon themselves to regulate. I hope it works.
I also hope that the insurance industry responds by spending more energy on challenging the cost structure of the big pharmacies than on defending themselves. Back atcha’ big pharmacies. The hope is that such productive infighting will eventually benefit consumers.
It is not just the insurance companies but also those Pharmacy Benefit Management Companies. There must be some way to check eligibility and to make sure people don’t abuse their drug benefits. But, in the name of cutting costs, cost continue to increase each and every year. These PBMs also fail to pass many of the cost savings on to employers.
As a practicing pharmacy for 37 years, every time I see a cut in the payment to pharmacies, I see an increase in the number of prescriptions filled. That is in fact the reason for the push in Mini Clinics being added to pharmacies and supermarkets with pharmacies.
Pharmacists must fill more prescriptions just to maintain the bottom line. We already take too much medication and the present business model will encourage us to take more. That fact will continue to increase cost, but the real question is what side effects will appear as we take more and more drugs.
Pharmacists can decrease cost if we are given the opportunity. The business model must change or the entire system will collapse.
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This is just the next step in the battle that started with mandatory 90 day mail order Rx fills. With the PBM’s trying to squeeze the Retail Pharmacy Chains for every possible cent – this is to be expected and indeed commended.
The innovations and benefits provided by the large Pharmacy chains like multi-lingual Pharmacists and multi-language Rx labels, 24 hour stores, patient counseling, help in selecting MED D Plans etc. justify the market share they command. The PBM’s, while looking to maximize their earnings, should not be seeking to shortchange the customer by denying access to the leading pharmacies of the area.
All in all – I see this happening more often in the near future before things improve.
Drug stores are third party captives. Without insurance plans, Medicare, and Medicaid, where would the drug store business be? Would the huge chain drug store location growth have taken place? There’s a lot of controversy about the “true” dispensing cost (dispensing cost does not include the actual drug itself) versus the reimbursement. Studies cannot agree on the “true” cost. Various study conclusions range from $6.10 to $11.27. California Medicaid pays $3.50, while Texas Medicaid pays $6.42. See this for more information.
So why should an insurer pay more than Medicaid? And given spiraling medical costs, won’t reimbursement allowances decline?
What’s developing is pretty much the same relationship that insurance companies have with doctors, laboratories and other segments of the medical profession — an adversarial one. However, when pharmacies or doctors get shorted, they simply raise the price to patients who are caught in the middle.
What’s needed is what was always needed — total and radical health care reform. And while were at it, let’s think about reinstating regulatory controls on the insurance industry. Because of the number of in-store pharmacies, I believe the supermarket industry can take the lead in this issue. It is affecting their bottom line and their customers.
The insurance companies are the biggest problem in the delivery of medical services. They make decisions based on criteria that are not verifiable what goods and services “should” cost and then tell the doctors, hospitals and pharmacist that that is all they will pay. Then the doctor or pharmacist sends a legitimate bill to the insurance company based upon the above cost. However, the insurance company often does not pay the doctor or pharmacist as the bills are submitted. They hold the bills until they reach a trigger point (say $20,000). Then they often offer the doctor a choice of receiving $10,000 now to settle the $20,000 bill or “paying when they get around to it.” If you doubt this take a few minutes and talk to any doctor. As a result of this “process” all cost for medical services go up. They go up to cover the increasing cost of doing buisness in an environment where insurance reimbursement controlls the majority of the cash flow. Do away with insurance and all cost will come down.
This is shaping up to be the Battle of the Titans. Who will bend first? On the one hand the insurance company needs the pharmacy to accept the insurance card. If not, the insurance company will have trouble getting consumers or companies to buy the plan. On the other hand, the pharmacy needs the insurance company to foot the bill for the prescriptions otherwise the consumer will go to the pharmacist who does accept the plan. And you think the Middle East is tough.
Could the insurance companies start to become a competitor of the pharmacies ala Cardinal Health? Could the pharmacies become competitors of the insurance companies and start collecting premiums for coverage? In a way, isn’t this starting to happen anyway? What is the future for the minute clinics? Don’t many insurance companies already accept direct fulfillment of ‘scripts?
When two giants battle, there is always a loser. I fear that in this case the potential loser will be the consumer. If battles like this keep going on the clamor for a total overhaul of our health system will come from both sides of the aisles in Congress. And we all know what happens when Congress gets involved. This power struggle needs to be rectified soon before it turns into a bigger mess.
Middlemen always increase costs. Accompanying the insurance companies, by preference or by necessity, are various layers of fourth-party providers such as ancillary brokers, analysts, investigators, and others. These are conveniently hidden, but still increase costs. In workers’ comp cases, another dollar-sucking layer is state governments.
No one understands this dynamic better than the big pharmacy chains. They are intimately familiar with all of the cost-creating sinkholes in the insurance industry. By refusing to accept certain plans, they are sending a signal to insurance companies to manage their costs better. De-regulation of insurance companies contributes to this phenomenon, and the big pharmacies are now taking it upon themselves to regulate. I hope it works.
I also hope that the insurance industry responds by spending more energy on challenging the cost structure of the big pharmacies than on defending themselves. Back atcha’ big pharmacies. The hope is that such productive infighting will eventually benefit consumers.
It is not just the insurance companies but also those Pharmacy Benefit Management Companies. There must be some way to check eligibility and to make sure people don’t abuse their drug benefits. But, in the name of cutting costs, cost continue to increase each and every year. These PBMs also fail to pass many of the cost savings on to employers.
As a practicing pharmacy for 37 years, every time I see a cut in the payment to pharmacies, I see an increase in the number of prescriptions filled. That is in fact the reason for the push in Mini Clinics being added to pharmacies and supermarkets with pharmacies.
Pharmacists must fill more prescriptions just to maintain the bottom line. We already take too much medication and the present business model will encourage us to take more. That fact will continue to increase cost, but the real question is what side effects will appear as we take more and more drugs.
Pharmacists can decrease cost if we are given the opportunity. The business model must change or the entire system will collapse.