Magazine article Drug Topics

Utopia: A World without Third-Party Administrators?

Magazine article Drug Topics

Utopia: A World without Third-Party Administrators?

Article excerpt

If third-party administrators are expensive, time-consuming, and a general pain to pharmacies, why not just kick 'em out?

That's what Jerome Sager, executive secretary, Empire State Pharmaceutical Society, was pondering.

Concluding that the world would be a better place without the administrators cluttering it up, he offered a surprising--some might call it radical--idea at a recent meeting in Albany, N.Y., between the various state pharmacy groups, the pharmacy schools, and New York's departments of health and social services. The proposal was well received, he said.

Removing the middleman: Sager's concept is this--do away with third-party administrators, who interject themselves between the client, on the one hand, and the pharmacy and patient on the other. Switch to a new system, under which the patients are reimbursed for their actual pharmaceutical costs directly by their employer or union welfare fund.

The usual objection to such a system is that it burdens the employer with paperwork and lacks cost controls. Sager has an answer to that: Under his proposal, the employer would look to the previous year to find the company's average cost per employee for prescription drugs. (Sager put the amount at around $300.) That figure would then become the maximum the company (or welfare fund) would reimburse any employee.

The beauty of this system, said Sager, is that both the payers--employers and welfare funds--and the pharmacies would benefit. In his view, the services of third-party administrators are very costly, although Sager said he couldn't assign a specific price tag. But part of the bill, he indicated, is the fee pharmacies must pay for a "telephone call" (electronic submission) to the processor--26 cents per prescription, in the case of one national administrator.

Add to that the time spent in checking patient eligibility and the drug formulary, along with various other tasks performed for the sake of the administrator. Then, there's the discount from average wholesale price, the general delay in reimbursement and resulting slowing of cash flow, rejected or pending claims, and audits. It all adds up to an expensive headache, one that takes the pharmacist away from what he's trained to do.

At the employer's end, use of an administrator with an open-ended benefit encourages waste, said Sager. He pointed out that patients often buy a six-month supply of medication, only to have it changed by the doctor long before it's used up. …

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