Strong medicine for drug costs.

• Author: Kessler, Robert

You're already squeezing every last dollar out of managed health care. Now what? Here's a look at how some companies keep the lid on prescription-drug expenses, the next cost hot button.

HANG OUT YOUR OWN SHINGLE

by Robert Kessler Director of QuadMed Clinic QuadGraphics, Pewaukee, Wis.

Company size: $900 million Employees: 8,400 Prescription drugs as % of total health-care costs: 5 Generic drugs as % of prescriptions filled: 30

A few years ago, when our prescription-drug costs started getting out of hand, we decided to set up our own pharmacy. For most companies, that might sound drastic, but this wasn't exactly foreign territory for us. QuadGraphics is a privately held printing company, with the majority of our employees in our Wisconsin plants. Our aim is to be completely self-sufficient in meeting our business and employee needs, so we have a number of divisions that aren't strictly related to our core business, such as QuadGalleries, which handles our corporate art collection, and QuadGardens, which is responsible for our grounds and landscaping. We believe these divisions contribute to and enhance our core printing business.

With that philosophy, we had several goals in adding a pharmacy to our existing on-site medical center in 1991. Giving our employees several pharmaceutical options to choose from was and is important to us, and we felt we could establish a more productive relationship and negotiate a better deal with drug manufacturers by contracting with them directly instead of through a network. Plus, we wanted to know where we were spending our prescription-drug dollars. Our pharmaceutical program was bundled with our major medical policy before 1991, so our former third-party administrator never tracked pharmacy costs separately.

Today, two full-time pharmacists, one part-time pharmacist and two full-time technicians fill more than 60,000 prescriptions a year. The pharmacy is open from 8:00 a.m. to 8:00 p.m. Monday through Friday and from 8:00 a.m. to 12:00 p.m. on Saturday. The employee copay is 25 percent of the prescription, with a $3 minimum. Spouses and dependents get identical coverage.

Our interplant shuttles deliver prescriptions five times a day to the employee-services division at each of our five Wisconsin plants, which are within a 50-mile radius of each other. We use an overnight express carrier to shuttle prescriptions to our other locations in New York, Minnesota, West Virginia and Georgia. If an employee in Saratoga, N.Y., calls in a prescription to our pharmacy by 3:00 p.m., it'll be there by 8:00 a.m. the next morning. Overnight express is cost-effective for us because the prescriptions simply go in with our regular corporate mail package.

Unlike many companies, we don't use formularies - we want our physicians to choose what they think is the right drug for the patient. But we do use generics whenever possible. Wisconsin has a generic-substitution law that allows pharmacists to substitute a generic drug for a brand-name one without notifying the physician, unless the physician writes "Do not substitute" or "Dispense as written" on the prescription. Under our pharmacy plan, if the employee insists on the name-brand drug, he or she pays the difference in price.

We also give employees the option of using two national pharmaceutical chains, and we've added independent pharmacies here and there to fill in any geographical gaps. But these options are more expensive, with an annual deductible of $50 per family and a 50-percent copay, so most people opt for our pharmacy. The average employee age is 31, so most employees' costs are relatively low.

At one time, we were spending a fair amount of money and employee time just to process our external network claims. Now our vendors funnel all their paperwork through a pharmaceutical adjudication company that we retain. The adjudication company processes the claims and pays the vendors, and we pay the company a per-claim fee every month...