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Small HMO Takes Big Step: Decides To Launch PBM

MANAGED CARE April 2005. © MediMedia USA
News and Commentary

Small HMO Takes Big Step: Decides To Launch PBM

MANAGED CARE April 2005. ©MediMedia USA

One small health insurer sees an opportunity in the recent woes that pharmacy benefits managers have experienced. As some question where PBM loyalty lies, Independence Health Association in the Buffalo, N.Y., area wants to show that it is more

than just an HMO and is now offering to manage the pharmacy benefit for large employers. This is the first time that a health plan that is not a national player has taken such a step.

"I’ve talked to a lot of people who are not happy with their PBMs," says John Rodgers, RPh, MBA, the pharmacy director at the 360,000-member health plan. "For many reasons. Service is one of them; cost, another. I think the big issue that has cropped up even on the public scene with the attorneys general going after the big PBMs is that the PBMs are not necessarily aligned in a way that they should be with employers in terms of [seeking] savings."

Rodgers says the insurer is trying to position itself to contract with employers no matter what direction those businesses take. For instance, Independence Health wants to get some business even from companies that turn away from highly managed care to self-insure.

"To answer the question, ‘What is the difference between offering our HMO product and providing self insured pharmacy benefits?’ — we will do either, depending on the employer’s risk tolerance," says Rodgers. "One big difference in New York is that self-insuring will allow an employer to get out from under state HMO mandated benefits that can be quite costly. An employer could easily enjoy a much lower out-of-pocket pharmacy benefit cost if he elects to go self-insured."

So far, the PBM, started in January, has contracted with about 12 employers, covering about 12,000 lives. Where from here?

"We still have to build our pharmacy network a little bit more completely outside of our area," says Rodgers. "Our staffing is tied to the western New York market right now. Our intent is to really manage that before we take any huge national accounts."

Consultants are watching.

"This will help them to make some inroads and produce savings in their self-insured product lines," William P. Kelly, a consultant in Albany, tells the Buffalo News.


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