ALEXANDRIA, Va. -- Pharmacy Direct Network, a new pharmacy benefit management company based here, is soliciting membership. Pharmacy Direct Network is open to all community pharmacies, including supermarket and independent pharmacies. Invitations to join have been sent to 62,000 community pharmacies.
The provider network was formed by the National Association of Chain Drug Stores. It began operations May 2.
Five directors were named at the NACDS annual meeting held April 23-27 in Palm Beach, Fla.. They are Ronald Ziegler, chairman, president and chief executive officer of NACDS; Lou Mitchell, owner of West Main Pharmacy, Penn Grove, N.J., and member of the executive committee of the National Association of Retail Druggists; James Harrison Jr., president and chief executive officer of Harco Drug, Tuscaloosa, Ala.; Gerald Heller, president and chief executive officer of May's Drug Stores, Tulsa, Okla., and Stewart Turley, chairman, president and chief executive officer of Eckerd Corp., Clearwater, Fla.
Six additional board members not from community pharmacy will be named "in the near future." Former American Stores executive Donald Hoscheit has been named as a consultant.
PDN is being presented as the "national retail pharmacy network that won't lock you out," according to the membership brochure. PDN was formed to help community pharmacies compete for managed care prescriptions, said Kurt Proctor, vice president of policy and program administration for NACDS, at a press conference held at NACDS headquarters.
Proctor said PDN will have its own staff and board of directors and will be operated independently of NACDS. PDN has signed a lease for 14,000 square feet near NACDS headquarters. Proctor said the organization will have 75 employees "pretty quickly and may grow quickly beyond that. We will also have a regional presence outside the corporate office."
Proctor said he expects PDN to have 40,000 members by the end of July. "I haven't heard anyone tell me they are not interested in joining," he said. "Charter" members who join before July 31 pay a membership of $300 per store, with a $450,000 maximum, said Proctor. However, after July 31, membership rises to $1,000 per store with no cap. PDN intends that charter members will get their dues back once the business can support itself on its revenues. This is an intent, not a legal obligation.
PDN will be marketed aggressively this summer and fall, said Proctor, in preparation for 1995 renewals of managed care contracts.
PDN differs in a major way from Super Net, the supermarket pharmacy network formed by supermarket operators. While members of Super Net can choose to accept or reject individual contracts, PDN members must accept every contract signed with the network.
A spokesman for the National Association of Retail Druggists was generally supportive of PDN. "We're pleased that NACDS has taken this step to address the negative current concerns in the third-party marketplace," said Todd Dankmyer, senior vice president.
"Importantly, PDN will be under the control of pharmacists rather than third-party intermediaries or other brokers who are now leveraging pharmacy's assets in the third-party marketplace. PDN has also taken the important step of ensuring that all pharmacy providers will have an opportunity to participate," said Dankmyer.
PDN will bid for contracts with employers and insurance companies to process and adjudicate claims and develop ways to contain prescription drug and health care costs, said Proctor. It will compete with PCS Health Systems, Scottsdale, Ariz., division of McKesson Corp., and Paid Prescriptions, part of Merck & Co.'s Medco Containment Services, Montvale, N.J., as well as networks formed by NACDS-member companies.
Proctor said that PCS processes some 250 million prescriptions annually. "We intend to be in that ballpark," he said.
An impetus for the network's formation was the "unhealthy economic clustering of power in the pharmacy benefit management community," said Proctor. He noted that PCS currently processes 30% of all third-party prescriptions, "not a real healthy situation for plan sponsors or for getting the most value from community pharmacies. Another reason for PDN is to strengthen pharmacy's position in the managed care marketplace. "Managing benefits and cost and care is the future marketplace," said Proctor. "Our intent is to improve patient care, pharmacy's bottom line and managed care's bottom line," said Proctor. "We will bring the real value of community pharmacy to plan sponsors and to consumers," he said.
"Another strength and opportunity," said Proctor, "will be the data developed in processing pharmacy claims and conducting drug utilization review. We will be a leader in working with sponsors and manufacturers to merge our information with other health care data on outcomes and cost-effective pharmacy care."
Reimbursement of pharmacies will be "traditional, but we will build on that with incentive reimbursement," said Proctor. He noted that while other benefits companies have offered a generic incentive of 50 cents, "our intention is to really implement these programs and to improve performance of the network through incentive payments."
Incentives would be paid to pharmacists for: not filling a script if that is most appropriate, achieving generic substitution goals, maximizing the use of formulary products, managing the care of "special at risk" patients, conducting drug utilization review and following up with the physician and patient when a problem is identified.
Proctor acknowledged that many pharmacists will have to change their behavior to concentrate on improving patient outcomes. "The better they perform, the better we will be."
The pharmacy benefits package is expected to include a formulary and manufacturer rebate agreements, said Proctor. Claims processing will be contracted out until the volume builds up. Other features include indigent assistance, drug sampling programs and "distribution and care systems" for drugs derived through recombinant biotechnology. Mail-order "will be accommodated if required," said Proctor, but not actively sought. In such cases, a contract would be put out to bid to PDN members.
PDN is a for-profit, nonstock membership company. Revenues not used for company operations will be returned to plan sponsors through lower premiums and to member pharmacies "through fair reimbursement and performance incentives," said Proctor. The organization got its start with $210,000 provided as seed money by 24 NACDS board member companies. The organization's bylaws allow for annual dues. However, none are planned because it is the intention of the organization to develop its own revenue stream, said Proctor.
The other benefit management companies "have been selling the value of community pharmacy," said Proctor. "We can do a better job by doing it directly."