Merck-Medco, the pharmaceutical benefit management company, is moving a growing proportion of its mail order prescription business onto its web site. We had the opportunity to interview Per Lofberg, President of Merck-Medco Managed Care, L.L.C., at the Jupiter Online Health Forum on January 26 and 27, 2000, where he participated in the program. The Forum was sponsored by Jupiter Communications, a New York-based consultancy.
Pharmaceutical benefit managers (PBMs) contract with HMOs and other payers. Most PBMs contract with pharmacy chains and independent stores to fill the prescriptions. Merck-Medco, more than the other major PBMs, has emphasized the mail order side of its business. For many groups it rewards enrollees that use the mail order service by reducing their co-payments. Lofberg pointed out the mail order is especially well suited for maintenance drugs that persons with chronic conditions will be taking and refilling month after month. About 80 percent of prescriptions are for maintenance drugs.
As of January 2000, the company reported that it was handling about 400,000 enrollee transactions on its web site each month, or about 16 percent of the transactions that are enabled for the Internet. Most are prescription refills, but the web site also allows users to request renewals of prescriptions and to get information about their drug benefits. The web capability is only 18 months old, and volume has grown steadily.
The potential for additional mail order business to move to the web site is significant. The company does not offer any special incentives for consumers to use the web site. However, using the net can improve turnaround time substantially, mitigating one of the concerns that some consumers have about purchasing on-line. Merck Medco saves about three dollars on each transaction that takes place on the web instead of through mail or phone calls. The web site also allows Merck-Medco to provide users with additional content about diseases and personal health management. Later this year, users will be able to build their own Web pages with information about their medical conditions and prescriptions.
Other factors may restrain growth of web site volume. Older adults use a higher proportion of prescription drugs but are underrepresented among consumers that are connected to the Internet and that have begun to buy on the web. Jupiter Communications analysts reported that their research showed that a large number of consumers were disinclined to buy prescriptions on the Web. Among the reasons: turnaround time, convenience of the local pharmacy and a preference for picking up your prescription in person in order to ask questions of the pharmacists or to do other shopping.
Merck-Medco has developed a special partnership with CVS, the large drug store chain in the eastern half o the United States. Merck-Medco enrollees can order their prescriptions are CVSs web site but still get their full benefits. At the conference, CVS reported that in half of the cases, consumers pick up their on-line prescriptions at the store rather than paying a nominal fee for delivery.
Merck-Medcos initial foray into electronic connection with physicians offices has progressed more slowly. Lofberg says that the company is directly connected to about 2,000 physicians through partnerships with companies that install clinic management systems. Writing prescriptions on-line could create significant efficiencies. However, all those physicians are only writing about 500 prescriptions per month on-line.
Minnesotans may know that several major PBMs have significant operations in the Twin Cities, including Merck-Medco. One of the first PBMs was Diversified Pharmaceutical Services (DPS), built up by United HealthCare and then sold to SmithKline Beecham. Express Scripts, based in St. Louis, recently acquired DPS. A year earlier, it acquired Value Rx, a Plymouth-based PBM. Several pharmaceutical companies acquired PBMs in the mid-1990s, but later regretted those purchases. Lofberg says that Merck-Medco has been very successful, measured in growth of the PBM and in its contribution to Merck earnings. Since the acquisition, the number of lives for whom Merck-Medco manages benefits has grown from 30 million to 50 million. Later in 2000, it will add 10 million more lives when United HealthCare transfers in its members.
Just as CVS and Merck-Medco have formed partnerships, other PBMs have connected with on-line drugstores. PCS has partnered with Drugstore.com and Express Scripts with Planet Rx. For more information about Merck-Medco, go to: http://www.merck-medco.com
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