In-house pharmacy scores with HMOs – health maintenance organizations – For the Pharmacist: Special Report – Cover Story

Elizabeth Richardson

In-house pharmacy scores with HMOs

Insurance companies are opening their own pharmacies in an attempt to keep costs down while providing quality third-party care to policy holders. Retailers say the competition is unfair because they’re not playing on an even playing field.

HOUSTON — Without fanfare, but with determination, insurance companies around the country are getting into the business of filling prescriptions, much to the chagrin of retail pharmacists who argue it is unfair competition.

Citing patient convenience and cost effectiveness as major reasons for getting into the pharmacy business, several national insurance companies hare rolled out their own in-house pharmacies, generally housed in HMO units with one of the heaviest concentrations located here.

While some pharmacists are resigned to the fact that insurance companies have entered the business, many say that they are not playing on the same retail playing field.

“I have no doubt that these operations will save people money,” said Keith Dunavent, vp at Town & Country Drug Stores, headquarted in Fort Worth. “But the cost savings comes from the disparity between pricing of the available cost of goods to retail pharmacists versus their contract prices with manufacturers. [Insurance companies] receive preferential treatment on acquistion costs, that’s why these pharmacies work.”

Forging ahead

Despite the inequities, insurance companies have forged into the pharmacy business, some as early as 1982. The pharmacies are managed either by the insurance companies themselves, or by independently owned operators which serve a number of carriers. Although CIGNA Healthplan houses 60-plus pharmacies nationwide, some members may get their prescriptions filled by independent operations working under the CIGNA umbrella. One example of an independent insurance pharmacy operator is the Kelsey Seybold Clinics, servicing patients from Sanus, Equicor, CIGNA, and Met Life in the Houston area.

At least one Houston retailer has taken advantage of the interest in pharmacy by insurance companies. Beekman Drug Corporation, once a small, two-store apothecary chain, pioneered the first two Prudential PruCare pharmacies in the early ’80s. The insurance company bought the units in 1982, and set up its pharmacy management system, which was revised to a more efficient structure in 1990. Today Prudential supports 53 PruCare pharmacy sites nationwide–10 which are located in the Houston area alone.

Retailers lash out

Some retailers have lashed out at these pharmacies as being poorly regulated prescription centers that are able to exist because manufactures sell product to them below an average retailer’s cost.

Not so, says Dan Clark, manager of pharmacy services for Houston’s PruCare pharmacy team. Clark, who previously worked as a staff pharmacist for several independents in the Houston area, thinks that the retailer’s criticisms of PruCare’s facilities, and others like it, are unfounded. If anything, says Clark, they are intensely regulated, which has actually helped make the PruCare system more successful than was ever anticipated.

“What most people don’t understand, is that we’re regulated probably more than a regular retail pharmacy is,” he said. “We get checked by the state board of pharmacy, the department of health, the department of insurance, and by Prudential itself–which is probably the most stringent of all the audits. Being under the microscope as much as we are, has increased our willingness and sensitivity to providing the best quality of care possible.”

However, Town & Country’s Dunavant contends that until these type of pharmacies operate under the same pricing guidelines as traditional drug stores, the smaller drugs store will simply fade away.

“Ultimately when it comes to pharmacies that deal in exclusive contracts, the bigger will get bigger but the smaller won’t get smaller, they will just go away.”

While that may be true, the PruCare, CIGNA and Kelsey Seybold pharmacies are much smaller than most traditional drug stores. They basically fill prescriptions and have a very limited front-end business. Most are housed within the “group model” units along with physicians’ offices, optical, dental, and x-ray labs. In some circumstances, the pharmacies may stand alone in certain locations. Group insurance policy members are the pharmacies’ only customers, including retirees who are allowed to continue the service.

Hours vary among locations. However, most maintain a 9 to 5:30 schedule, Monday through Friday, with no weekends or nights. Since all of PruCare’s facilities are situated within medical buildings, 24-hour operations aren’t part of PruCare’s long-range plan, PruCare’s Clark says, but he doesn’t entirely dismiss the idea either.


According to Clark, the system benefits for both customers and pharmacists.

Most customers pay $2 to $5 as a co-pay fee for prescriptions. Maintenance drug supplies for three months are also available for a $15 co-pay fee. The pharmacy will mail a customer’s maintenance drugs to them, but doesn’t advertise a “mail order service” per se.

While critics attack the pricing structure on pharmaceutical products these pharmacies are allowed, Clark believes the cost savings equals out in the long run. “Sure, we get some pricing breaks, but most people think we buy like the government, and we don’t,” he said. “In addition, our customers, since they pay an insurance premium, expect to get some cost savings.”

Good working environment

Pharmacy personnel contend the atmosphere is great because of the professional interaction with physicians. “Our advantages, in my bias, is that we have an increased degree of professionalism, in regards to the potential daily interaction with physicians and nurses,” said Ramie Ramirez, Kelsey Seybold’s director of pharmacy.

According to some insurance company staff pharmacists, patients could also benefit. “We can be more involved in a patient’s therapy because we work so closely with a medical group,” said Christine Boss, a PruCare pharmacist-in-charge. “There are so many changes in the drug industry, so the more questions you’re asked, the more on top of things you are.”

Advancement opportunities are also a plus for pharmacists. PruCare’s Clark himself was a director of administration at two different managed care divisions for a stint before heading back as pharmacy manager in 1990.

While insurance prescription programs like those at Prudential, CIGNA and Kelsey Seybold have been successful, their founders don’t think the systems pose a big threat to retail pharmacy outlets. Says Kelsey’s Ramirez, “Sure, in the early days, we were a threat to the retailer–that was before all of the pies got divvied up. Now we just try to survive like everyone else.”

COPYRIGHT 1991 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2004 Gale Group

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