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HomeMy WebLinkAboutPharmacy Contract Memo TO: BOARD OF COMMISSIONERS FROM: DAVE INBODY SUBJECT: ONSITE PHARMACY DATE: 5/8/2012 CC: ERIK KROPP Background In February 2011, Deschutes County began operation of an onsite employee health clinic, the Deschutes Onsite Clinic (DOC). Initially, it was intended for the DOC to dispense prescriptions thereby reducing plan expenses for the medication costs and increasing convenience for employees and their families. Two primary issues prevented this from developing in the manner or iginally conceived. 1. Healthstat, the company hired to operate the DOC do not prescribe or dispense narcotics at their clinics. Since narcotics represent a significant portion of the cost of prescriptions in the health plan and tend to be the more expensive medications, their exclusion significantly reduced the potential for cost savings. 2. The DOC staff includes a full time nurse practitioner and a part time physician. In the State of Oregon, although a nurse practitioner can prescribe medications, they are prohibited from dispensing medications. This created an additional inconvenience for patients seeing a nurse practitioner. They were now required to see the physician to have their prescription dispensed. Since the physician was liable for this dispensed prescription, this required a review of each prescription before dispensing. The result was that nearly all of the physician’s time was consumed dispensing medications. In fact, additional physician hours were added to address the prescription dispensing. Despite the limitations associated with dispensing prescriptions from the DOC, it still resulted in $12,316 in savings and $23,644 in savings to patients (through March 2012). With the potential for prescription savings limited through the DOC, the altern ative of opening an onsite pharmacy was explored. A request for proposal was released and in August 2011, the Board of Commissioners approved a letter of intent with Take Care Health Systems, a subsidiary of Walgreens. Onsite Pharmacy Operations Located next to the DOC, the onsite pharmacy (DOC Pharmacy), will operate very similarly to a retail pharmacy. Prescriptions, whether written in the DOC or by an outside provider, can be filled in the DOC Pharmacy. The pharmacy will be operated by Take Care Health Systems and all staffing will be Take Care employees. There will be an incentive for using the DOC Pharmacy instead of a retail pharmacy as highlighted in the chart below. Type of Medication Co-Pay at DOC Pharmacy Co-Pay at Retail Pharmacy Generic Drugs $0 $10 Brand Name Drugs-Multiple Source $10 $20 Brand Name Drug-Single Source $20 $35 2 The DOC Pharmacy operating hours will be from 9am-6pm Monday through Friday. The staff will include one full time pharmacist and one full time pharmacy technician. A drop box will also be available for leaving prescriptions when the pharmacy is not open. Additionally, the Walgreens retail store, located in Redmond, will honor the discounted DOC Pharmacy co-payments. Confidentiality for all transactions through the DOC Pharmacy will be maintained by Take Care. Deschutes County will not have access to individual transaction information. The County will receive monthly aggregate, de-identified reporting on activities at the DOC Pharmacy. Financial Impact The County’s health benefits plan spends about $200,000 per month on prescriptions. The ingredient costs through the DOC Pharmacy are expected to save 19%. The success of the DOC Pharmacy relies on utilization. A 65% penetration level, or the percentage of presc riptions dispensed through the DOC Pharmacy, is projected in the first year with it increasing to 78% by the fifth year. This chart outlines the projected savings from the DOC Pharmacy for the first five years of operation. Category Year 1 Year 2 Year 3 Year 4 Year 5 Penetration Level 65% 70% 72% 75% 78% Ingredient Cost Savings $290,412 $327,903 $353,547 $385,972 $420,606 Other Cost Savings* $191,369 $394,798 $422,852 $458,731 $496,830 Co-Payment Adjustment ($234,524) ($251,330) ($262,399) ($277,435) ($292,860) Net Operating Costs ($297,614) ($319,394) ($332,681) ($346,148) ($360,275) Plan Cost Savings ($50,357) $151,976 $181,319 $221,120 $264,301 Employee Cost Savings $234,524 $251,330 $262,399 $277,435 $292,860 TOTAL COST SAVINGS $184,166 $403,306 $443,719 $498,555 $557,161 *-Other Cost Savings includes program cost savings and generic conversion. The implementation and start up costs are expected to be $103,772. Based on these projections, the DOC Pharmacy will breakeven in the beginning of the third year. Higher penetration rates, program savings or generic conversion will result in the project breaking even sooner. The overall success of the DOC Pharmacy will be gauged based on the three primary objectives of the Triple Aim: Improve the health of those on the Deschutes County Health Benefits Plan Provide a more positive and more convenient health care experience Save money in the Deschutes County Health Benefits Plan Recommendation It is recommended that the Board of Commissioners sign the five-year contract with Take Care Health Systems for operation of the DOC Pharmacy.