For Barbara Cohan of Pompano Beach, Fla., the cost of her prescription drugs was getting out of hand.
A social worker and geriatric specialist, she formerly worked for companies that ran nursing homes and provided medical and drug benefits. But 31/2 years ago, when she turned 65, Cohan decided she didn’t want to work 60 hours a week anymore, and she opened her own business planning care for seniors whose relatives are not in the area.
She qualified for Medicare coverage that takes care of physician and hospital costs. But Medicare does not provide a drug benefit, so Cohan had to pay the full price for her prescriptions.
Cohan, though, has discovered a way to trim about $30 to $40 from her $200 monthly prescription bills by joining a discount plan that permits her to obtain medication through mail order or visits to a local pharmacy. A lot of other people, particularly seniors, are turning toward such plans — or in some cases, Internet discount sites — to reduce drug costs.
The reason: About 70 million Americans, including about one-third of those on Medicare, do not have prescription drug insurance benefits. And with many Medicare HMOs planning to eliminate or further restrict medication benefits this year, the number is likely to increase unless Congress passes one of several bills providing drug coverage.
“I love the plan. I mail in my prescriptions and they send me the medications promptly. I’ve calculated that I’m saving between 15 and 18 percent over retail prices,” Cohan said. “It’s not a huge amount of money, but I would say it is a significant amount.”
Cohan’s program is called YOURxPLAN, a joint venture between Merck-Medco Managed Care LLC, the nation’s largest pharmacy benefits manager, and The Reader’s Digest Association. It was launched in April “to address the needs of Americans without drug coverage,” said Sandi Peterson, Merck-Medco’s senior vice president of marketing.
“We realize there is an acute need in the marketplace for lower-priced drugs,” Peterson said. “We are able to use our leverage because we manage pharmacy services for some 65 million Americans through their HMOs and other health insurance.”
The plan requires enrollment — $25 for an individual and $40 for a household. Once consumers join, they can choose between home delivery, which offers the biggest savings over retail prices, or visiting a local pharmacy.
An additional 10 percent discount is given to patients whose doctors write prescriptions for brand-name drugs on a list of 40 medications, about one-third of which are Merck products, Peterson said. She described the Merck-Medco plan as unique among discount programs because a central computer keeps records on all prescriptions filled by an individual and will issue warnings if there could be harmful drug interactions.
Merck-Medco is only one of many discount plans, many of which operate online, that are gaining popularity. Others are run by brick-and-mortar operations, such as CVS Inc., Eckerd Corp., Walgreen Co. and Phar-Mor Inc., and compete with Internet-only firms such as Drugstore.com, Soma.com and PlanetRx.com. The AARP and the American Automobile Association also operate discount plans for members.
Another plan, RxUniverse, based in Fort Lauderdale, Fla., became the first online drugstore in 1996, according to its chief executive officer.
RxUniverse is owned by Managed Healthcare Systems Inc., a pharmacy benefits manager that oversees pharmacy plans for several million Americans in health insurance plans. The parent company has a large pharmacy network in place to sell drugs at prices negotiated on behalf of those plans.
The key to the company’s success, chief executive officer Ken Sack said, is that the discount drug program was an outgrowth of the pharmacy benefits management business and does not require much overhead. The Web site was designed by Sack’s brother, Robert, and his Boca Raton, Fla.-based firm, Envent Inc.
RxUniverse.com sells prescription drugs over the Internet without requiring consumers to buy a membership card, but it also sells a card that can be used at local pharmacies. The cost is $19.95 a year for individuals and $34.95 a year for families. Savings range from 5 percent to 40 percent for name brands and up to 80 percent for generics, Sacks said.
Consumers who fill prescriptions on the Internet must send in their prescription forms before orders are filled.
But even with Americans seeking to save on drug costs, Internet prescription sales in 1999 of about $160 million represented just a tiny piece of the $101 billion U.S. market, according to Forrester Research, an Internet research firm in Cambridge, Mass. That is why many of the discount plans also issue membership cards that can be taken to local pharmacies.
“Seniors without drug coverage and people with no insurance are the ones paying the highest prices, but they also are the least likely to access the Internet and therefore cannot get the discounts,” said Tricia Smith, an AARP health lobbyist.
Among seniors, buying drugs online may never replace going to the drugstore. About 39 percent of American households have access to the Internet, but only 8 percent of households headed by someone at least 65 years old are online, according to Forrester estimates.
Moreover, many of those who have Internet access do not want to buy their medications online, according to InsightExpress, a Greenwich, Conn.-based market research firm.
“The online drugstore business model makes sense in theory, but not in practice,” said Charles Hamlin, the InsightExpress president. “It’s not gaining traction in the online marketplace because people desire the personal interaction they receive with the local pharmacist.”
Someone planning to join a discount drug plan should consider several things, said Chris Robbins of Arxcel, a Buffalo, N.Y., consulting firm that works for those who want to carefully monitor drug prescription costs, including HMOs and pharmacy benefit managers.
“First and foremost, make sure you don’t have drug coverage through your insurance,” Robbins said. “Some people don’t realize they have such coverage.”
Next, he said, keep in mind that many Medicare HMOs still will allow members to access discount pricing they have negotiated, even though they have reached the maximum allowable benefit.
For example, if an HMO member is permitted to make small co-payments until a $250 quarterly cap is reached, it still may be possible to buy additional prescriptions during that quarter at the below-retail price the HMO has negotiated.
Next, if you plan to use a pharmacy rather than mail delivery to get your drugs, find out if that pharmacy is a member of the discount plan you want to join.
“A lot of pharmacies don’t like these plans because they are turning retail customers into discount customers and that affects the bottom line,” Robbins said.
Plans run by large pharmacy benefits managers or those with large national memberships are most likely to offer consistent savings.
“You need to determine if you actually are saving money,” Robbins said. For example, if you save $8 a month on your prescriptions, but the plan membership costs $9.95 a month, you’re losing money. And sometimes, the discounted price quoted by a plan could be higher than the retail price, particularly at stores that promote loss leaders to generate traffic.
Also, some drug plans offer members the opportunity to sell membership discount cards to others and receive a commission for each sale. Robbins’ advice: Stay away from them.
“It’s simply multilevel marketing,” he said. “At that point, it becomes a commodity business instead of a basic discount drug plan.”
