When a company is considering the establishment of a mail order pharmacy, costs are a major consideration, according to John Boyd, president of the Boyd Co. An expensive location can cost millions more than an inxpensive one — each year. A new analysis of comparative operating costs conducted by the company ranks Sioux Falls, S.D., as the least costly location of 21 cities under consideration to operate a hypothetical mail order pharmacy center. San Diego ranked first. Only major geographically variable factors were considered : labor, utilities, land acquisition and construction, taxes, and corporate travel.

In addition to these costs, insurers should also look at “the regulatory climate for a given state,” says Boyd. “South Dakota recently expanded the ratio of technicians to pharmacists. Most states have two technicians for every registered pharmacist. Some states allow more technicians — South Dakota has a 4:1 ratio.

“Insurers are prioritizing the comparative costs of doing business. They are focusing on the potential labor cost savings in a smaller market location,” says Boyd. “The trend is to consider smaller market, less costly, more favorably regulated locations.”

The highs and lows of operating a mail order pharmacy
  San Diego, Calif. (highest cost city) Phoenix, Ariz. Willingboro, N.J. Sioux Falls, S.D. (lowest cost city)
Labor
Weighted average annual earnings $48,066 $43,573 $46,315 $38,777
Annual base payroll $5,767,920 $5,228,760 $5,557,800 $4,653,240
Fringe benefits $2,134,130 $1,934,641 $2,056,386 $1,721,600
Total annual labor $7,902,050 $7,163,641 $7,614,186 $6,374,939
Electricity $252,540 $138,732 $245,016 $138,231
Natural gas $4,615 $4,965 $5,743 $4,690
Amortization $2,617,576 $1,854,776 $1,515,171 $1,261,083
Property and sales tax $618,291 $714,029 $532,005 $453,973
Heating and air conditioning $28,073 $49,201 $82,097 $96,479
Shipping $23,597,190 $24,095,205 $23,406,705 $23,562,765
Corporate travel $207,730 $196,117 $207,748 $146,565
Total annual geographically variable operating costs $35,228,065 $34,216,426 $33,608,671 $32,038,725
Source: A 2008 Comparative Cost Analysis for the Mail Order Pharmacy Industry, The Boyd Co., 2008.

Managed Care’s Top Ten Articles of 2016

There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

Major health care players are determined to make health information exchanges (HIEs) work. The push toward value-based payment alone almost guarantees that HIEs will be tweaked, poked, prodded, and overhauled until they deliver on their promise. The goal: straight talk from and among tech systems.

They bring a different mindset. They’re willing to work in teams and focus on the sort of evidence-based medicine that can guide health care’s transformation into a system based on value. One question: How well will this new generation of data-driven MDs deal with patients?

The surge of new MS treatments have been for the relapsing-remitting form of the disease. There’s hope for sufferers of a different form of MS. By homing in on CD20-positive B cells, ocrelizumab is able to knock them out and other aberrant B cells circulating in the bloodstream.

A flood of tests have insurers ramping up prior authorization and utilization review. Information overload is a problem. As doctors struggle to keep up, health plans need to get ahead of the development of the technology in order to successfully manage genetic testing appropriately.

Having the data is one thing. Knowing how to use it is another. Applying its computational power to the data, a company called RowdMap puts providers into high-, medium-, and low-value buckets compared with peers in their markets, using specific benchmarks to show why outliers differ from the norm.
Competition among manufacturers, industry consolidation, and capitalization on me-too drugs are cranking up generic and branded drug prices. This increase has compelled PBMs, health plan sponsors, and retail pharmacies to find novel ways to turn a profit, often at the expense of the consumer.
The development of recombinant DNA and other technologies has added a new dimension to care. These medications have revolutionized the treatment of rheumatoid arthritis and many of the other 80 or so autoimmune diseases. But they can be budget busters and have a tricky side effect profile.

Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

More companies are self-insuring—and it’s not just large employers that are striking out on their own. The percentage of employers who fully self-insure increased by 44% in 1999 to 63% in 2015. Self-insurance may give employers more control over benefit packages, and stop-loss protects them against uncapped liability.