As CVS Caremark celebrates the first anniversary of the merger that brought together retail pharmacy giant CVS Corp. and pharmacy benefit manager Caremark Rx, others in the pharmacy benefits industry are taking time to reflect on the significance of the trend toward consolidation.

Many employers and drug plan sponsors wonder if industry consolidations will result in a decrease in choices and competition in the marketplace – or whether it could have a positive impact on their bottom lines.

“These changes in the industry and the structures of the major service providers should make plan sponsors really sit up and pay attention to what impact consolidation could have on their benefit packages and their financial responsibilities,” said Brian Bullock, president and CEO of The Burchfield Group, a consulting firm that helps employers and other plan sponsors control the costs of providing prescription drug benefits. “The industry is never going to stop changing, so plan sponsors need to understand the big picture. Are you offering the most effective benefits package you can, and what language in your PBM contract might cause trouble down the road?”

Plan sponsors need to understand what their PBM contracts say in terms of pharmacy access and exclusivity, which are commonly affected by corporate consolidation, Bullock said. It’s also important to avoid particularly long-term agreements, especially considering potential changes in pricing benchmarks as well as structural changes resulting from consolidation.

“Consolidation is certainly not all bad for plan sponsors,” said Kent Wangsness, vice president at The Burchfield Group. “It can open doors to new services and cost savings that benefit the consumer and the payer. But as always, the devil is in the details. Not knowing the ins and outs of your PBM contract is the one sure way to run into trouble.”

Today's Pharmacy Benefits Podcast features a discussion between Bullock and Wangsness, both pharmacists who now consult for plan sponsors, on consolidation trends and the impact of reduced competition. Bullock also invites employers and other plan sponsors to contact The Burchfield Group by sending an e-mail to info@burchfieldgroup.com or by calling 1-800-778-1359.

As the FDA adds new drugs to the over-the-counter class, plan sponsors need to weigh their coverage options.

Traditionally, employer-provided prescription drug coverage focused on just that – prescription drugs. But as many common prescription drugs, most recently Zyrtec ®, become available over the counter without a prescription, employers are increasingly interested in the cost savings associated with over-the-counter (OTC) drugs.

"The increase in the types of drugs available over the counter is really changing employer-provided coverage plans," said Brian Bullock, president and CEO of The Burchfield Group, a consulting firm that helps employers and other plan sponsors control the costs of providing prescription drug benefits. "For employers that want to maintain a good set of benefits and coverage for their employees, the lower costs of many OTC drugs make it relatively painless for an employer’s plan to cover those drugs."

Meanwhile, the U.S. Food and Drug Administration is considering the official establishment of a third class of drugs, referred to as "behind-the-counter" (BTC) drugs. These drugs are available without a prescription but only through direct contact – and perhaps a brief consultation – with a pharmacist.

When deciding how to handle OTC and BTC drugs, employers need to consider a variety of variables, including members' current drug usage and the company's goals for coverage and costs. The BTC classification is still unsettled territory, so the current focus is on developing effective approaches to managing coverage for the two existing categories of OTC and prescription drugs.

"Employers have three general approaches for how to handle OTC drugs," said Cory Belken, a senior consultant at The Burchfield Group and, like Bullock, also a pharmacist. "As OTC drugs become a larger part of their members' usage habits, employers can simply leave their plans alone and some utilization will naturally migrate to OTC drugs. They can also restrict the use of prescription drugs in a particular category to encourage OTC use, or they can implement a 'step therapy' plan that requires patients to first use OTC drugs when appropriate before moving to prescription drugs."

Employers interested in learning more about potential savings from OTC drugs can request a free overview report from The Burchfield Group by sending an e-mail to info@burchfieldgroup.com or by calling 1-800-778-1359.

Without a viable alternative to the average wholesale price benchmark, how should plan sponsors protect themselves?

After more than a year since major lawsuits cast a dark shadow over the use of average wholesale price as a benchmark for prescription drug pricing, little change has taken place in the way of finding a suitable alternative for the AWP benchmark.

Brian Bullock, president and CEO of The Burchfield Group, is working with employers and other prescription drug plan providers to prepare for changes that will eventually come in the wake of AWP. The Burchfield Group is a pharmacy-benefit consulting firm that helps employers and other plan sponsors control the costs of providing prescription drug coverage for their beneficiaries. He sees pharmacy benefit managers working to change contract language in preparation for a replacement benchmark, but those changes might not be enough, according to Bullock.

Bullock and colleague Kent D. Wangsness, who holds a doctor of pharmacy degree and is a vice president at The Burchfield Group, discussed these issues and more in the today’s installment of the Pharmacy Benefits Podcast. Bullock says the market has seen a number of options floated as alternatives to AWP – including wholesale acquisition cost, average manufacturer price and average selling price – but none seems to fit what Bullock calls the four essential criteria for a replacement pricing benchmark.

According to Bullock, the replacement must be:

-accurate and reliable
-current and up to date
-generally and widely available
-transparent and accessible

"It's important for employers to have a handle on what is going on in their prescription claims data, what the pricing looks like, and how are we going to equitably adjust for pricing with new contract terms," Bullock said. "Plan sponsors can end up upside down if contract language does not protect them in the event the prescription drug pricing benchmark changes. A plan sponsor can only make solid, learned decisions with access to substantial, transparent data and an understanding of the significance of the details."

For more ideas on how to handle potential changes in prescription drug pricing, or to ask a question or comment on the podcast, send an e-mail to Bullock at bbullock@burchfieldgroup.com or call 651-389-5640.

From Wal-Mart to Washington, a wide range of factors will affect prescription drug coverage in the year ahead. The major pharmacy-benefit news stories from 2006 lay foundation for pharmacy benefits planning for '07 and '08.

In 2006 we saw the completion of the first year of Medicare Part D implementation, Democrats take control in Washington and promise Medicare reform, Wal-Mart introduce $4 generic drugs, and the foundation of the AWP drug pricing model come under scrutiny. All of these happenings from last year form the basis for pharmacy benefit planning for 2007 and 2008, according to Brian Bullock, president of The Burchfield Group.

Bullock and his colleague Rob Shelley, vice president at The Burchfield Group, discuss the impact of the major events in 2006 and what to look for in 2007 in today's installment of The Burchfield Group's Pharmacy Benefits Podcast, downloadable for free at www.burchfieldgroup.com or from the iTunes podcast directory. The Burchfield Group is a pharmacy benefit consulting firm that helps employers and plan providers manage the prescription drug benefits they offer.

"There was a lot of important news around the pharmacy benefit in 2006," Bullock said. "We saw a lot of issues that affected plan sponsors, and now those issues are forming the basis of what plan sponsors should be thinking about as they look toward 2008."

For more information on managing drug spend in 2007 and beyond, visit www.burchfieldgroup.com/2007. That page includes a link to a document that illustrates the major factors that affect a plan sponsor’s costs for providing prescription-drug coverage.

"As we start the new year, one very important issue for plan sponsors to look at is the lifespan of their pharmacy-benefit management contracts. If a PBM contract is set to expire within the next 12 months, this is the time to start updating and getting that contract reviewed and freshened up for plan year 2008," Shelley said. "There have been a lot of changes within the pharmacy benefit area over the past year, and these contracts need to reflect today's realities."

Bullock invites his podcast listeners to submit questions and comments, which he and Shelley will address in future podcasts. Write to bbullock@burchfieldgroup.com or call 651-389-5640 with questions or to learn more about what to look for in planning pharmacy benefits in the year ahead.

Specialty pharmaceuticals – injectable drugs used to treat chronic and rare diseases such as multiple sclerosis, various forms of cancer, Alzheimer’s and more – currently make up a $40 billion market, and that market size is expected to increase to $75 billion by 2008. Additionally, the specialty-drug marketplace has seen a large amount of consolidation in recent years, with pharmacy-benefit management companies now owning many of the specialty drug manufacturers.

With the growing market and increased consolidation toward PBM ownership, employers providing prescription drug coverage are faced with new challenges in terms of managing costs and administration, according to Brian Bullock, president and CEO of The Burchfield Group, a pharmacy-benefit consulting firm that helps employers reduce the cost of providing prescription drug coverage for their employees. Bullock and his colleague Rob Shelley, vice president at The Burchfield Group, discuss specialty pharmaceuticals and related concerns for employers in today's episode of the Pharmacy Benefits Podcast.

"These biotech drugs are expensive, and cost is a major issue. But when used in the right situations, they're life-savers," Bullock said. "Employers need to keep an eye on a few critical issues related to specialty pharmacy: distribution of the drugs, administration and waste, compliance tracking, and patient education. Costs for specialty drugs can easily get out of control if employers don't have the necessary oversight."

Shelley explains that The Burchfield Group has recently seen certain biotech drugs creep into the top ten common prescriptions for many employers, and costs for these drugs are increasing at nearly 20 percent per year, far outpacing increases in the rest of the pharmaceutical industry.

"I've been approached by employers asking about how to increase co-pays on specialty drugs, but I'm not sure that's the best approach," Bullock said. "The drugs are expensive, yes, but it is critical to make sure the consumer can afford these drugs and will use them appropriately – otherwise they won't be effective for treating illness."

Bullock invites his podcast listeners to submit questions and comments, which he and Shelley will address directly and in future podcasts. Send an e-mail to bbullock@burchfieldgroup.com or call 651-389-5640 with questions or to learn more about managing specialty pharmaceuticals.

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