Health system pharmacy becomes mail-order pharmacy for employee meds

System saves $2.4 million

Pharmacies in larger health care systems can broaden their own mission and save the health system money by taking on roles that typically are handled through outside vendor contracts.

For example, the Carolinas HealthCare System of Charlotte, NC, saved $2.4 million in expenses over three years by starting an in-house mail-order pharmacy program that handles medications for the hospital's thousands of employees and dependents, says Robert Carta, assistant vice president of the division of pharmacy services at Carolinas HealthCare System.

"We have 29 hospitals and are keeping this in-network now," Carta says. "We can purchase drugs at the hospital's prices with a substantial discount."

There are 36,000 members who receive their medications from the mail-order pharmacy, Carta notes.

"We spend in retail and mail-order pharmacy about $34 million on employee medications," he adds.

Pharmacy directors typically do not think about medication costs associated with employee benefits. But Carta saw this as a revenue source and way to control expenses.

"The real issue is we have these internal resources, and we have them in every health care organization," Carta says. "So why hire consultants to develop prior authorization, clinical initiatives, and co-pays when we do that every day?"

Also, the pharmacy department knows how to buy drugs at the cheapest costs, he adds.

"We knew we could buy them cheaper than we could ever get in a deal with one of the big mail-order houses," Carta says.

An analysis of the costs of the top 100 medications prescribed to employees and covered family members showed a tremendous potential savings by moving this service in-house, he says.

For example, some of the large mail-order pharmacy contractors receive rebate incentives from pharmaceutical companies to push one type of brand drug over another. The health system mail-order pharmacy can save money by putting generic drugs on its formulary since it saves the health system overall by not opting for the rebates, Carta explains.

"If I put a branded statin drug on the formulary, it might cost $3 a tablet while a generic statin costs 2cents a tablet," he says.

Even after a rebate, the branded drug might cost 98cents more than the generic drug, so it benefits the health system to encourage use of the generic drug, he adds.

The health system does this by offering the generic drug, which costs 2cents per tablet for free to employees, says Susan D. Bear, PharmD, director of clinical pharmacy services for Carolinas HealthCare System.

For people who have five or six different medications and who would otherwise have co-pays for each, the free generic drugs can result in a considerable savings, she notes.

"We also were able to decrease co-pays to employees and offer some incentives that they didn't have before," Bear says. "For example, their mail-order drugs arrive in 2-3 days because the pharmacy is right here in town, and we offer them 30-day refills through the mail-order pharmacy, when most people offer 90 day refills."

For employees, the 90-day refill is a big expense, and having a 30-day refill option allows them to budget their money more effectively, Bear adds.

Since the in-house mail-order pharmacy's goals are to save money for the overall health system and not just to make profits for its own entity, the way it does business is slightly different than the way contract mail-order pharmacies might do business.

Carta spent two years learning as much as he could about human resources health plan benefits and the business of running a mail-order pharmacy before opening the mail-order pharmacy.

"I knew we could save the organization money by bringing this in house," Carta says. "But more importantly, this is a long-term vision: The vision of this mail-order pharmacy was to save money for the organization and to really get into the lead in managing drug therapy by clinical pharmacists."

Health system pharmacy directors institute clinical initiatives into their hospitals every day, but they don't offer clinical initiatives to employees, he notes.

"We have the employees' adherence and prescription information; we own their data, so shouldn't we be doing something with all these data?" Carta says.

Carta's research paid off. The health system decided to start the in-house mail-order pharmacy business, which now employs 16 people and is its own self-contained business unit.

"Once you receive the capital funding to build the building and install an automated information technologies system, then that's the one-time expense hit," Carta says. "You justify it by saying, 'This is what it costs to run drug inventory, staff an IT system, and use a claims processor to process claims."

Carolinas HealthCare System has its own internal architectural and business management departments, which helped with the front-end work and costs, he adds.

"A single hospital system probably could put 1,000 square feet of space within the hospital and call it an employee pharmacy and do the same thing," Carta says.

Even this down-sized version of a mail-order pharmacy would save a hospital money, he adds.

So far the in-house mail-order pharmacy has been successful from both a cost-savings and an employee satisfaction perspective, he says.

"The best part is our employees pick up the phone and talk to a pharmacist who works for Carolina HealthCare System," Carta adds. "It makes a difference to them to know we work for their same health system."