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  • cmxsux2 cmxsux2 May 8, 2010 6:41 PM Flag

    Cheryl Pegus: CMO of Walgreens

    <<"Implementation in this direction will have its challenges within the retailers indirect spend , the learning curve of the indirect costs model lacks the understanding in the objective outcome of the traditional retailers operations,and will take some time.The biggest picture of integration has yet to be achieved by CVS, RAD, and the other business in this sector.">>

    I believe your analysis is correct overall but incorrect with respect to the above. Disease state management takes place upstream from the retail spend so in general there is no integration of the 2. Carepatterns, the CMX disease state management group was/is an incredibly profitable business segment within the PBM. While the overall shortcomings of CMX are well documented, the operation of Carepatterns is not one of them. MHS, ESRX, as well as every insurance company with a PBM operate a disease state management group. Realistically, the only thing that would be seen from the retail spend area would be increased rx sales brought on by the increased rx compliance seen from the disease state management program. Issues such as precert and step edits if they apply are also resolved upstream from the retail spend with no need for integration of the 2. Integration already exist between the rx contracting and the formulary development folks (who realistically write criteria to direct people to an equally efficacious but less costly alternative) so the retail spend portion of the business actually exists outside of these business operations.

    From a business only perspective the disease state management model is quite simple: That the increase in rx expenditures (mainly from enhanced compliance) plus the cost of the program is LESS that the cost of repeated inpatient stays caused by chronic noncompliance with evidenced based disease protocols and an ever decreasing health status brought about by the following:

    Acute episode to hospitalization to stability to noncompliance to health status decline to acute episode to hospitalization……repeat ad nauseum.

    Disease state management if applied correctly intervenes just after stability and before noncompliance. It is essential that the patient be stable in order for the program to work. The reason for the tuff sell to clients is 2 fold. First healthcare cost to the client initially INCREASE due to increased medication compliance. Second, the client has to make a fairly long term commitment to the program in order to realize savings. Compounding all of this is that the savings are seen on the medical side and not on the pharmacy side (which has increased costs) and in many cases, especially if the client has carved out their pharmacy benefits as is the case with the clients of the large PBM’s (CVS, MHS, & ESRX) those segments are overseen by different departments (medical v pharmacy) within the client’s business. Since the pharmacy benefits are carved out, different companies oversee the medical and pharmacy benefits of the client. For the insurance companies with PBM’s, since medical and pharmacy benefits are fully integrated, the cost of operating a DSM program is less than that of the standalone PBM’s.