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9/4/2000

PBMs Ally with Internet Pharmacies

Katherine M. Bennett

Recently formed alliances between pharmacy benefit management companies (PBMs) and legitimate Internet pharmacies show the gradually increasing popularity of these online stores.

Drugstore.com, Inc., based in Bellevue, Wash., announced last November formation of a five-year alliance with ProVantage Health Services, Inc. The PBM serves more than 3500 customers and more than 18 million people. In June 1999, PCS Health Systems, Inc., signed with drugstore.com, giving the then four-month-old company its start at obtaining third-party coverage for prescriptions. 

PlanetRx.com, Inc., of South San Francisco, Calif., bought YourPharmacy.com from 36-million-member Express Scripts, Inc, in October 1999. Qualified members of the PBM can purchase prescriptions at PlanetRx.com for the price of a usual copayment. 

CVS.com, with headquarters in Woonsocket, R.I., became last October the sole mail-order provider of pharmacy services to Merck-Medco members who need treatment with complex, expensive drug therapies. Through this long-term agreement, the two companies will jointly market ProCare, CVS's specialty pharmacy company. In addition, Merck-Medco Managed Care, L.L.C., can acquire up to a 10% equity interest in ProCare. The agreement gives Merck-Medco's members, numbering upwards of 51 million, the option to pick up prescriptions at brick-and-mortar CVS pharmacies and buy nonprescription medicines and general health products at CVS.com. 

Yet, all is not well for online pharmacies. The Dec. 11, 1999, issue of The Economist reported that PBMs know they can exploit the online pharmacies' advertising to attract more people to mail-order prescriptions. "In return for allowing web firms to fill insured prescriptions, the PBMs either want to be paid for their co-operation, or are demanding that they handle the distribution themselves." 

According to The Economist, Merck-Medco uses its own warehouses to fill all the 30-day mailed prescriptions ordered through CVS.com. Also, the access that PlanetRx.com now has to Express Scripts' patient base comes at an annual cost of $11 million. 

What's the prognosis for these legitimate online pharmacies? While "unlikely to succeed as stand-alone businesses," The Economist predicts that online pharmacies will generate income by eventually selling data on patients.