We are one of the largest PBMs in North America and we provide a full range of
pharmacy benefit management services, including retail drug card programs, mail
pharmacy services, drug formulary management programs and other clinical management
programs for thousands of client groups that include HMOs, health insurers, third-party
administrators, employers, union-sponsored benefit plans and government health
programs.
Our PBM services include:
retail network pharmacy management
mail pharmacy services, including specialty drugs for which we have contracted
with our clients to provide to their members
benefit design consultation
drug utilization review
formulary management programs
disease management
compliance and therapy management programs for our clients
medical information management services
Non-PBM services provided through our Pharma Business Solutions (“PBS”) segment
include:
distribution of pharmaceuticals requiring special handling or packaging where
we have been selected by the pharmaceutical manufacturer as part of a limited
distribution network.
distribution of pharmaceuticals through Patient Assistance Programs where we
receive a fee from pharmaceutical manufacturers for administrative and pharmacy
services for the delivery of certain drugs free of charge to doctors for their
indigent patients
distribution of sample units to physicians and verification of practitioner
licensure prior to sample distribution through our wholly owned subsidiary,
Phoenix Marketing Group, LLC (“PMG”)
Prescription drugs are playing an ever-greater role in healthcare and today
constitute the first line of treatment for many medical conditions. As pharmaceutical
research opens the potential for even more effective drugs, demand can be expected
to increase. For millions of people, prescription drugs equate to the hope of
improved health and quality of life. At the same time, rising prescription drug
costs are gradually shaping one of the most persistent challenges of our time.
Even as pharmaceutical development opens new paths to better healthcare, we
confront the possibility that high costs may limit access to the needed therapies.
Sales and Marketing. In the United States, our sales managers and directors
market and sell PBM services, supported by a team of client-service representatives,
clinical pharmacy managers and benefit analysis consultants. This team works
with clients to make prescription drug use safer and more affordable. A dedicated
sales staff cross-markets specialty pharmacy services to our PBM clients. In
Canada, marketing and sales efforts are conducted by our staff based in Mississauga,
Ontario.
Member Services. Although we contract with health plans, the ultimate recipients
of many of our services are the members of these health plans. We believe that
client satisfaction is dependent upon member satisfaction. Members can call
us toll-free, 24 hours a day, 7 days a week, to obtain information about their
prescription drug plan from our trained member service representatives.
Provider Relations. Our Provider Relations group is responsible for contracting
and administering our pharmacy networks. To participate in our retail pharmacy
networks, pharmacies must meet certain qualifications, including the requirement
that all applicable state licensing requirements are being maintained. Pharmacies
can contact our pharmacy help desk toll-free, 24 hours a day, 7 days a week,
for information and assistance in filling prescriptions for our clients’ members.
In addition, our Provider Relations group audits pharmacies in the retail pharmacy
networks to determine compliance with the terms of their contracts.
Clinical Support. We employ physicians, clinical pharmacists, registered nurses
and data analysts who provide technical support for our PBM services. These
staff members assist in providing clinical pharmacy services such as formulary
development and management, drug information programs, clinical interventions
with physicians and members, development of drug therapy guidelines and the
evaluation of drugs for inclusion in clinically sound therapeutic intervention
programs.
The mission of our Office of Research and Planning is to conduct timely, rigorous,
and objective research to support evidence-based pharmacy benefit management.
The research department evaluates the cost-effectiveness of drug therapies,
evaluates pharmacy benefit designs and clinical offerings, and conducts various
other studies related to clinical and financial aspects of the pharmacy benefit.
For example, in June 2003 we released our 2002 Drug Trend Report, marking our
seventh consecutive year of tracking drug trends. Based on a large sample of
our membership base, the report examines trends in pharmaceutical utilization
and cost, and the factors that underlie those trends. Results of this and other
studies are shared at our annual outcomes conference as well as through various
publications and other client forums.
Information Systems. Our Information Systems department supports our pharmacy
claims processing systems and other management information systems that are
essential to our operations. Uninterrupted point-of-sale electronic retail pharmacy
claims processing is a significant operational requirement for us. All domestic
claims are presently processed through systems which are maintained, managed
and operated by EDS at their Auburn Hills, Michigan facility. Canadian claims
are processed through systems maintained, managed and operated by IBM at their
Montreal, Quebec facility. Disaster recovery services for all systems are provided
through our EDS services agreement and SunGard Availability Services. We have
substantial capacity for growth in our claims processing facilities.
Competition
We believe the primary competitive factors in each of our businesses are price,
quality and scope of service. We believe our principal competitive advantages
are our strong managed care and employer group customer base that supports the
development of more sophisticated PBM services, and our commitment to provide
flexible and distinctive service to our clients.
There are other PBMs in the United States, most of which are smaller than us
and offer their services on a local or regional basis. We do, however, compete
with a number of large, national companies, including Medco Health Solutions,
Inc. (“Medco”), AdvancePCS and CaremarkRx, Inc. (“Caremark”), as well as large
health insurers and certain HMOs which have their own PBM capabilities. Several
of these competitors may have greater financial, marketing and technological
resources than us.
Consolidation, including the pending acquisition of AdvancePCS by Caremark,
has been, and may continue to be, an important factor in all aspects of the
pharmaceutical industry, including the PBM segment. We believe the size of our
membership base provides us with the necessary economies of scale to compete
effectively in a consolidating market.
Some of our PBM services, such as disease management services, compete with
those being offered by pharmaceutical manufacturers, other PBMs, large national
companies, specialized disease management companies and information service
providers. Our non-PBM services compete with a number of large national companies
as well as with local providers.
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