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Caremark's Gain Is Medco's Loss

Cheryl A. Thompson

The recent awarding of a major three-year contract for mail-service pharmacy services to Caremark Rx Inc., instead of renewal with Medco Health Solutions Inc., has the winner on a hiring spree in Phoenix, Arizona, in preparation for a substantial increase in prescription business.

Caremark wants to hire 150–200 pharmacists and at least 500 "associates"—pharmacy technicians, administrative personnel, clerical workers, shippers, materials handlers, and security personnel—in advance of the contract's start date on January 1, said Hammad Shah, general manager of the company's mail-service facility in Phoenix.

According to data from the Arizona State Board of Pharmacy, Caremark's hiring goal for pharmacists is equivalent to 6–8% of the current work force in the Phoenix metropolitan area.

"We're very excited about the potential here and the labor force here," Shah said, adding that the company does not expect to find all its new pharmacists in the Phoenix area or even Arizona.

He said the 100,000-square-foot facility, which opened in October 2002, now fills 10,000–15,000 prescriptions per day and will fill 40,000–50,000 prescriptions per day once it starts handling business from the Federal Employee Program (FEP). That anticipated daily workload, however, is far from the facility's capacity, he said.

To prepare for the increased workload, Shah said, Caremark is routing prescriptions from other mail-order pharmacies to the Phoenix facility so that new staff members can train with realistic volumes and the equipment can be tested at these higher levels. "They will slowly ramp up until we get to the higher number that we want to be at," he said. "We're doing everything possible to make sure that it's not just an overnight 15 to 50," in thousands of prescriptions.

About one fourth of current employees at the facility are pharmacists, he said, and about half are pharmacy technicians.

In addition to the pharmacists who check every filled prescription before it leaves the facility, pharmacists work in the administrative area, Shah said. Some verify the accuracy of prescriptions entered into the computer system by "translators," the personnel who decipher handwritten prescriptions received by mail. Others call physicians to discuss potential drug interactions that the pharmacists believe could be a problem. Still others communicate with patients who have a question about their medication.

Shah said the active FEP prescriptions residing with Medco will, at the end of the year, be electronically transferred to Caremark along with patients' prescription history and other relevant information. Phoenix personnel will also start fielding questions from those patients before year's end.

For medications normally handled by a Caremark specialty pharmacy, he said, the Phoenix site will process the first fills with the help of the specialty pharmacy, which will then contact the patients to encourage them to deal directly with it in the future.

BlueCross BlueShield Association (BCBSA) manages FEP and, for the 3.9 million members enrolled in the standard option, offers two outpatient pharmacy benefit programs: a community pharmacy option and mail service.

The health plan giant announced in mid-February that it had selected Caremark over Medco and four other pharmacy benefit management companies to provide the mail service, which had a volume of about 188,000 prescriptions per week in 2003.

AdvancePCS, a wholly owned subsidiary of Caremark since March 2004, manages the community pharmacy option through a separate contract.

But regardless of where the FEP patients have their prescriptions filled, their full medication profiles will be maintained by Caremark because the company has the transaction records for all the prescriptions, Shah said. And with that information, the company's drug-interaction screening software can alert Caremark pharmacists to potential problems, such as a community pharmacy filling a short-term fluoroquinolone prescription for a patient whose maintenance medications include a drug contraindicated with the antimicrobial.

Medco spokeswoman Ann Smith denied that the contract loss would lead to layoffs of pharmacists. "We are not in any way, shape, or form undergoing layoffs in our mail-order pharmacies," she said, owing to the recruitment of new contracts and early renewal of existing ones.

Smith asserted that Medco's business will actually increase in 2004 because major automakers signed contracts giving enrollees financial incentives to have their prescriptions filled by mail order.

The contracts to which Smith referred are four-year collective bargaining agreements signed in September and October 2003 between the United Auto Workers and General Motors Corporation, Ford Motor Company, DaimlerChrysler AG's Chrysler Group, and two parts suppliers. According to the autoworkers' union, the agreements cover more than 772,000 workers, retirees, and surviving spouses of retired workers.

The Detroit News reported that these labor agreements require prescriptions for maintenance medications to be filled by the mail-service pharmacy under contract. Copayments for these prescriptions are $5–$10 for a 90-day, rather than 30-day, supply.

In discussing the BSBCA contract loss with investment analysts during an April 27 conference call, Medco chief David B. Snow Jr. said "FEP had a historically high satisfaction rate."

"We did not lose the account on customer service," he said, but also admitted that the account had had a backlog of prescriptions and that legal issues might have been a factor in BCBSA's decision not to renew with Medco.

Medco resolved many of its legal issues in April when it negotiated agreements with 20 state attorneys general and the U.S. Justice Department. The federal government's interest in Medco's business practices stemmed from the firm's FEP contract with BCBSA. As part of the agreements, Medco assented to enhance the level of clinical and financial information shared with physicians, patients, and clients.

Caremark also has at least one legal issue to face. According to the Wall Street Journal, two pharmacists have filed a lawsuit in a Florida state court alleging that the mail-service pharmacy where they worked resold medications that had been returned from other patients, which is illegal in that state.

A Caremark spokesman said the company "strenuously refutes the accusations." In addition, "the company does not restock."

Arizona is one of the relatively few states that allow returned medications to be resold. According to Arizona State Board of Pharmacy regulations, a pharmacy may accept medications for resale if the pharmacist determines that they have not been removed from the "original, manufacturer's, unopened container" and have not been "subjected to contamination or deterioration."