Mail-Service and Specialty Pharmacies
Will Save More than $300 Billion for Consumers,
Employers, and Other Payers
Over the Next 10 Years
Prepared for
September 2014
Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
I.
Executive Summary
On healthcare issues, poll after poll shows that cost is the greatest concern for both consumers and
employers. At the same time, the growth of Amazon.com and other online retailers highlights
greater consumer demand for convenience and home delivery. With prescription drugs, these
trends have led to greater use of high-tech mail-service pharmacies. While patients with short-
term, acute needs continue to use drugstores, patients with chronic conditions like high blood
pressure increasingly rely on mail-service pharmacies to save money and get prescriptions
delivered directly to their homes.
Trends in pharmaceutical development have also led to the creation of specialty pharmacies.
Specialty pharmacies are distinct from traditional pharmacies in that they coordinate many aspects
of patient care and disease management for patients on complex, high-cost drug therapies for rare
diseases. They efficiently deliver medications with special handling and storage or distribution
requirements. They also coordinate care with other clinicians and health care professionals to
improve clinical and economic outcomes for patients and payers. Conventional pharmacies are
not equipped to fulfill this range of needed services, so payers and benefit managers turn to the
unique expertise of specialty pharmacies.
Proposed state laws and regulations that restrict mail-service and specialty pharmacy options
threaten to raise costs for both consumers and payers.
Major Findings
Compared to brick-and-mortar drugstores, mail-service and specialty pharmacies offer deeper
discounts and enhanced services. Based on Visante’s analysis, this generates substantial savings
for the U.S. health care system:
Mail-service pharmacies will save an estimated $5.1 billion for consumers, employers,
and other payers in 2015, and $59.6 billion over the 10-year period 2015-24.
Specialty pharmacies will save an estimated $13.5 billion for consumers, employers, and
other payers in 2015, and $251.5 billion over the 10-year period 2015-24.
Combined, mail-service and specialty pharmacies will save an estimated $18.6 billion for
consumers, employers, and other payers in 2015, and $311 billion over the 10-year
period 2015-24.
The major findings above are based on a recent analysis by the Centers for Medicare & Medicaid
Services (CMS) that found that mail-service pharmacies save an average of 16% on prescription
costs compared to retail pharmacies. Proposed legislation could threaten the ability of mail-
service pharmacies to continue to provide such savings. Likewise, specialty pharmacies have
demonstrated average savings of 10% on drug costs and substantial savings on non-drug medical
costs compared to retail pharmacies. Legislation that restricts the use of specialty pharmacies
could put these savings at risk.
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
II.
Discussion
Use of Mail-Service Pharmacies for Chronic Care Prescriptions
Mail-service pharmacies typically provide 90-day prescriptions for medications that consumers
need on an ongoing basis. Local drugstores are used for new therapy starts and acute-care
prescriptions. Consumers use mail-service pharmacies once they are stabilized on a medication,
after having finished several 30-day prescriptions from their local drugstores.
Mail-Service Pharmacies Encourage Generic Drug Use
Without patients waiting in line at the pharmacy counter, mail-service pharmacists have more
“fill-to-receive” time that allows them to contact patients and physicians to seek approval for the
substitution of generic drugs when brands are prescribed. As a result, the generic substitution rate
(GSR), which measures how often generics are substituted for brands when a generic is
available, is higher for mail-service pharmacies than drugstores.1,2 Another measure, the generic
dispensing rate (GDR), measures the proportion of all dispensed prescriptions that are generic.
Comparisons between mail-service pharmacy and drugstore GDRs must account for the different
mix of drugs, prescription sizes, and copay incentives for each channel.3 When these differences
are taken into account, GDRs are comparable for mail-service pharmacies and drugstores.
What Makes Mail-Service Pharmacies More Efficient
Mail-service pharmacies are able to generate savings for consumers and payers by being vastly
more efficient than brick-and-mortar drugstores. Through the use of computer-controlled quality
processes, robotic dispensing machinery, and advanced workflow practices, mail-service
pharmacies are able to fill large quantities of prescriptions while enhancing quality and reducing
costs. This technology allows pharmacists to focus on clinical and cost management functions,
rather than counting pills, printing instructions, and assembling prescriptions by hand as is done
in drugstores.
Superior Safety through Mail-Service Pharmacies
Technologically advanced mail-service pharmacies achieve dispensing accuracy rates up to 23
times better than drugstores. Studies have found an error rate of nearly one in every 50
prescriptions (1.72%) filled at drugstores, compared to less than one in every 1,000 prescriptions
(0.075%) at mail-service pharmacies.4 By being more accurate, mail-service pharmacies help
ensure that patients get the correct drugs, dosages, and dosage forms, and thus avoid costly
adverse drug events that can result in hospitalization.
Patients Have Access to 24/7 Counseling and Support
Mail-service pharmacies provide patients convenient access to 24/7 confidential counseling and
answers to questions on prescription medications over the phone or Internet. Pharmacists also
1 Federal Trade Commission, “Pharmacy Benefit Managers: Ownership of Mail-Service Pharmacies,” August 2005.
2 Wosinska, M., et al., “Generic Dispensing and Substitution in Mail and Retail Pharmacies,” Health Affairs, July 2004.
3 Federal Trade Commission, op. cit.
4 Teagarden, J.R., et al., “Dispensing Error Rate in a Highly Automated Mail-Service Pharmacy Practice,” Pharmacotherapy,
November 2005.
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
counsel patients on affordable medication options and identify generic and therapeutic
substitution opportunities.
Mail-Service Pharmacies Improve Patient Adherence
Patients receiving their prescriptions through mail-service pharmacies follow their doctors’
prescribed drug regimens more often than drugstore users. This improves health outcomes and
often reduces non-drug medical costs, such as hospitalizations. Part of the reason mail-service
pharmacy improves adherence is that patients receive their prescriptions in 90-day supplies,
rather than 30-day supplies, which tends to reduce adherence problems.5 Even after accounting
for 90-day prescriptions, however, evidence suggests that mail-service pharmacy users achieve
higher adherence rates than drugstore users.6 For patients with chronic conditions, such as
diabetes, high cholesterol, and high blood pressure, studies find adherence is approximately eight
percentage points higher for mail-service pharmacy users.7,8,9 Lower copays, home delivery, and
refill reminder programs all likely play roles.
Less Waste at Mail-Service Pharmacies
Prescriptions obtained through mail-service pharmacies are associated with less waste than 90-
day prescriptions obtained through drugstores. Waste occurs when patients stop taking their
medication before using the entire supply of a prescription. This can be due to the need to
discontinue therapy, switch to a different drug, or change dosage strengths. To minimize waste,
mail-service pharmacies are typically used only once a patient is stable on a medication after
having finished several 30-day prescriptions from their local drugstores. A 2011 study of patients
taking statin medications found that on a yearly basis, four 90-day drug prescriptions through
drugstores were associated with 4.04 days of waste, while four 90-day mail-service prescriptions
were associated with 3.08 days of waste.10
Advantages of Specialty Pharmacies
Specialty pharmacies are also widely utilized by pharmacy benefit managers (PBMs), health
insurance companies, and plan sponsors to help manage prescription drug costs and improve
quality of care. Based on Visante’s analysis, specialty pharmacy management delivers three
major advantages:
Helps Patients Take Complex Medications Safely and Effectively: Specialty pharmacies
employ highly trained teams of patient care coordinators, pharmacists, nurses, and
insurance specialists, all working toward helping patients take complex medications
safely and effectively. Specialty pharmacy services significantly improve the quality of
patient care relative to other distribution channels.
5 Hermes M., et al., “Adherence to Chronic Medication Therapy Associated with 90-Day Supplies Compared with 30-Day
Supplies,” Journal of Managed Care Pharmacy, 2010, 16:141-142.
6 Duru, K., et al., “Mail-Order Pharmacy Use and Adherence to Diabetes-Related Medications,” The American Journal of
Managed Care, January, 2010.
7 Ibid.
8 Zhang, L., et al., “Mail-Order Pharmacy Use and Medication Adherence among Medicare Part D Beneficiaries with Diabetes,”
Journal of Medical Economics, October 2011.
9 Devine, S., et al., “A Comparison of Diabetes Medication Adherence and Healthcare Costs in Patients Using Mail Order
Pharmacy and Retail Pharmacy,” Journal of Medical Economics, 2010.
10 Vuong, T., et al., “Statin Waste Associated with 90-day Supplies Compared to 30-day Supplies,” Prime Therapeutics, 2011.
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
Decreases Drug Costs by 7-12%: Specialty pharmacies and coordinated benefit management
strategies provide a savings advantage of 7-12% relative to other distribution channels such
as retail pharmacies and physician offices.
Decreases Non-Drug Medical Costs by 10-40%: Specialty pharmacy services reduce
expenditures on hospitalizations and other medical costs through a range of patient-centered
services that enhance patient adherence to drug therapies, including patient education,
training and monitoring, nursing and supportive care, case management, and 24/7 pharmacy
support.
Specialty Pharmacies Must Meet Strict Requirements
Specialty pharmacies must meet many requirements to effectively handle injectable biologic
medications that require refrigeration and can cost many thousands of dollars per dose. These
requirements include:
Providing round-the-clock access to pharmacists, nurses, and clinicians dedicated to and
specially trained with respect to the disease state treated by the drug, the specialty drug
itself, and the drug’s potential side effects
Adhering to rigorous storage, shipping, and handling standards to meet product-label
shipping requirements, such as temperature control, and timely deliveries of the product
in optimal condition
Performing disease-specific and drug-specific patient care management services that
meet the unique needs of each patient and that incorporate multiple safeguards when
dispensing and delivering the drug to ensure patient safety
Collecting data and tracking outcomes for specific patients as required
Managing compliance and persistency of drug regimens for patients
Managing care within manufacturer Risk Evaluation and Mitigation strategies (REMS)
program requirements, including REMS reporting, Phase IV trials, the dispensing of FDA
trial drugs under strict protocols, and related clinical and cognitive counseling
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
III. Savings from Mail-Service and Specialty Pharmacies
Visante projects 10-year savings (2015-24) for consumers, employers, and other payers of $311
billion, based on mail-service savings of $59.6 billion and specialty savings of $251.5 billion.
Estimated savings in 2015 will be $5.1 billion for mail-service and $13.5 billion for specialty.
Estimated mail-service pharmacy savings are based on a recent cost analysis conducted by CMS
that compared prescription costs at mail-service pharmacies to costs at brick-and-mortar drug
stores in Medicare Part D. The agency found that costs at mail-service pharmacies were 16% less
than drug stores across all drugs examined.11 Many studies have also shown improved patient
adherence to prescription regimens with mail-service pharmacies. 12,13,14,15
Specialty pharmacies also deliver significant savings. For example, the Pennsylvania Medicaid
program’s use of specialty pharmacies helped save 21% on overall health expenditures for
beneficiaries using specialty drugs, including 12% on specialty drug costs and 56% on inpatient
hospital costs.16 Other studies have demonstrated that specialty pharmacies save 13-23% on
drug costs. 17, 18 In addition, specialty pharmacies have demonstrated significantly improved
patient adherence and reduced medical costs for transplant patients, patients with HIV, hepatitis
C, cancer and multiple sclerosis. 19, 20, 21, 22, 23, 24, 25
11 Centers for Medicare & Medicaid Services, “Part D Claims Analysis: Negotiated Pricing Between General Mail Order and
Retail Pharmacies,” December 2013, available at https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenIn/Downloads/Negotiated-Pricing-Between-General-Mail-Order-and-Retail-
PharmaciesDec92013.pdf
12 Schmittdiel et al., “Safety and Effectiveness of Mail Order Pharmacy Use in Diabetes,” American Journal of Managed Care,
2013; 19(11):882-887.
13 Zhang, L et al., “Mail-Order Pharmacy Use and Medication Adherence among Medicare Part D Beneficiaries with Diabetes,”
Journal of Medical Economics, October 2011.
14 Hermes M., et al., “Adherence to Chronic Medication Therapy Associated with 90-Day Supplies Compared with 30-Day
Supplies,” Journal of Managed Care Pharmacy, 2010, 16:141-142.
15 Duru, K., et al., “Mail-Order Pharmacy Use and Adherence to Diabetes-Related Medications,” The American Journal of
Managed Care, January, 2010.
16 Kaiser Commission on Medicaid and the Uninsured, “Managing Medicaid Pharmacy Benefits: Current Issues and Options,”
September 2011.
17 Medco Health Solutions, “Specialty Pharmacy: Future Evolution of Service and Value,” Presented at PCMA Specialty
Pharmacy Symposium, May 2008.
18 Baldini, C., and Culley, E., “Estimated Cost Savings Associated with the Transfer of Office-Administered Specialty
Pharmaceuticals to a Specialty Pharmacy Provider in a Medical Injectable Drug Program,” Journal of Managed Care
Pharmacy, 2011;17(1):51-59.
19 Miller S., “Personalizing the Specialty Business,” Presentation at the PCMA Specialty Pharmacy Business Forum,” April
2012.
20 Visaria, J., and Frazee, S., “Role of Pharmacy Channel in Adherence to Hepatitis C Regimens,” American Journal of
Pharmacy Benefits, 2013; 5(1):17-24.
21 Tang. J., and Faris, R., “Exploring the Impact of Dispensing Channel on Medication Adherence Among Multiple Sclerosis
Patients,” Presented at the 14th Annual International Meeting of the International Society for Pharmacoeconomics and
Outcomes Research (ISPOR), May 2009.
22 Mitra, et al., “Treatment Patterns and Adherence among Patients with Chronic Hepatitis C Virus in a US Managed Care
Population,” Value Health, Jun-Jul, 2010; 13(4):479-86.
23 Tan, et al., “Impact of Adherence to Disease-Modifying Therapies on Clinical and Economic Outcomes among Patients with
Multiple Sclerosis,” Advances in Therapy, Jan 2011; 28(1):51-61.
24 Tschida, et al., “Outcomes of a Specialty Pharmacy Program for Oral Oncology Medications,” American Journal of Pharmacy
Benefits, 2012;4(4):165-174.
25 Tschida, et al., “Managing Specialty Medication Services Through a Specialty Pharmacy Program: The Case of Oral Renal
Transplant Immunosuppressant Medications,” Journal of Managed Care Pharmacy, 2013; 19(1):26-41
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
Cost of Pharmacy Restrictions
Savings through mail-service and specialty pharmacies will only be available if the legal and
regulatory environment remains neutral toward such pharmacies. When state or federal laws or
regulations place restrictions or prohibitions on the use of these pharmacies, savings are
threatened.
Health plans, insurers, and PBMs typically use a variety of incentives to encourage their
enrollees to use mail-service pharmacies, especially for maintenance medications. Legislation
that prohibits plans from using automatic home delivery of 90-day refills for chronic medications
limits the use of the lowest-cost pharmacy channel option.
A study by the Maryland Health Care and Insurance Commissions found that anti-mail service
legislation can lead to dramatically lower mail-service pharmacy use. In Maryland, mail-service
pharmacies accounted for just 7% of prescription drug payments for employer plans subject to
the legislation. This compares with mail-service accounting for 22% of payments for self-insured
employer plans not subject to the legislation.26 In short, anti-mail-service legislation cut the use
of mail-service pharmacies by more than 50%, which means that any resulting savings was also
cut by more than 50%.
Based on this experience, state or federal laws or regulations that place restrictions or
prohibitions on the use of mail-service and/or specialty pharmacies could substantially increase
prescription drug costs.
26 Note that the Maryland study’s finding that mail-service pharmacies accounted for 22% of prescription drug payments is
consistent with the national mail-service penetration rate of approximately 7% of prescriptions, since mail-service prescriptions
are typically three times larger than retail prescriptions (90-day vs. 30-day supply). In addition, the chronic care medications
dispensed by mail-service pharmacies are not available generically as often as acute care medications dispensed by drugstores.
This also makes mail-service pharmacies’ share of payments marginally greater than their share of prescriptions.
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
IV. Methodology and Savings Estimates
The following important assumptions were incorporated into the analysis:
1. Total U.S. outpatient prescription drug expenditures for 2015-24 are projected to be $3.9
trillion ($295 billion in 2015),27 with $2.66 trillion for traditional (non-specialty) prescription
drugs ($227 billion in 2015) and $1.26 trillion for specialty medications dispensed by
pharmacies within prescription benefit plans ($68 billion in 2015).28
2. Projected expenditures for specialty medications above capture only the approximate 50% of
specialty expenditures that flow through the pharmacy benefit (i.e., potentially available for
pharmacies). The other 50% flow through the medical benefit (i.e., physician offices, clinics,
hospitals).29 For purposes of this analysis, our savings estimates include only the drug
expenditures within prescription benefit plans.
3.
14% of traditional outpatient drug expenditures flows through mail-service pharmacies.30
4. CMS found that mail-service pharmacies save 16% vs. retail pharmacies31
5. Visante estimates that specialty pharmacies save 10% of specialty drug costs vs. retail
pharmacies, plus an equal amount of “non-drug medical/hospital cost savings.” 32
6. Appendix A estimates savings for each state.33
Methodology: Mail-Service/Specialty Pharmacy Savings
Projected Expenditures 2015-24
billions $
Traditional
Specialty Rx Total Outpatient Specialty Med
Total
Rx Benefit
Benefit
Rx Benefit
Benefit
SpecialtySource
Total US Spend for Outpatient Prescription Drugs
CMS National Health Expenditures (NHE),
1
$3,917
Dispensed Under the Pharmacy Benefit
Prescription Drugs, Projected
Visante estimates based on published data
Specialty spend approx $80b in 2011, plus approx 14%
2
$2,515
from IMS Health and PBM Drug Trend
annual increases.
Reports
50% of specialty drug spend goes through Rx benefit
EMD Serono Specialty Digest,
3
(is incl in NHE Rx), plus 50% through medical benefit
$2,660
$1,258
$1,258
7th edition
(is not incl in NHE Rx)
14% of traditional drug spend dispensed by mail-
IMS Health, Channel Distribution by Non-
4
$372
service pharmacies
Discounted Spending
Savings from Mail-Service and Specialty
5
Mail-service pharmacy: Estimated savings of 16%
$59.6
CMS analysis 2013
6
Specialty pharmacy: Estimated savings of 10%
$125.8
Visante estimates based on published
7
+ equal amount non-drug medical/hospital savings
$125.8
studies
8
Total Savings
$59.6
$251.5
$311.1
27 CMS National Health Expenditures (NHE), Prescription Drugs, Projected, available at https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html
28 Visante estimate based on published data from IMS Health and PBM Drug Trend Reports.
29 EMD Serono Specialty Digest™, 7th edition. http://www.specialtydigest.emdserono.com/
30 IMS Health, Channel Distribution by Non-Discounted Spending (U.S.), available at
http://www.imshealth.com/deployedfiles/imshealth/Global/Content/Corporate/Press%20Room/2012_U.S/Channel_Distributio
n_by_Non-Discounted_Spending_U.S.pdf
31 Centers for Medicare and Medicaid Services, “Part D Claims Analysis: Negotiated Pricing Between General Mail Order and
Retail Pharmacies,” December 2013, available at https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovGenIn/Downloads/Negotiated-Pricing-Between-General-Mail-Order-and-Retail-
PharmaciesDec92013.pdf
32 Visante estimates based on evaluation of more than fifty published studies.
33 Kaiser Family Foundation, Distribution of Health Care Expenditures by Service by State of Residence, available at
http://kff.org/other/state-indicator/health-spending-by-service-2/
September 2014
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Mail-Service and Specialty Pharmacies To Save More than $300 Billion Over 10 Years
APPENDIX A: Estimated Savings from Mail-Service/Specialty Pharmacies
Based on projected drug expenditures 2015-24 (millions)
Mail-Service
Specialty Pharmacy
State
Pharmacy Savings
Savings (Rx benefit)
Total Savings
Alabama
$1,128
$4,762
$5,890
Alaska
$116
$491
$607
Arizona
$1,076
$4,544
$5,620
Arkansas
$563
$2,377
$2,940
California
$5,890
$24,867
$30,757
Colorado
$704
$2,970
$3,674
Connecticut
$907
$3,827
$4,734
Delaware
$219
$924
$1,143
District of Columbia
$110
$466
$576
Florida
$4,561
$19,256
$23,818
Georgia
$1,733
$7,316
$9,049
Hawaii
$262
$1,106
$1,368
Idaho
$232
$980
$1,212
Illinois
$2,251
$9,502
$11,753
Indiana
$1,198
$5,056
$6,254
Iowa
$594
$2,507
$3,101
Kansas
$471
$1,987
$2,458
Kentucky
$852
$3,597
$4,450
Louisiana
$996
$4,206
$5,202
Maine
$301
$1,272
$1,573
Maryland
$1,285
$5,424
$6,709
Massachusetts
$1,384
$5,841
$7,225
Michigan
$1,840
$7,769
$9,609
Minnesota
$969
$4,092
$5,061
Mississippi
$568
$2,397
$2,965
Missouri
$1,233
$5,204
$6,436
Montana
$145
$613
$758
Nebraska
$350
$1,478
$1,828
Nevada
$479
$2,022
$2,501
New Hampshire
$270
$1,141
$1,411
New Jersey
$2,069
$8,733
$10,802
New Mexico
$323
$1,362
$1,684
New York
$4,410
$18,619
$23,029
North Carolina
$1,944
$8,208
$10,153
North Dakota
$155
$656
$812
Ohio
$2,096
$8,847
$10,943
Oklahoma
$703
$2,969
$3,673
Oregon
$641
$2,707
$3,348
Pennsylvania
$2,850
$12,031
$14,880
Rhode Island
$264
$1,115
$1,380
South Carolina
$877
$3,703
$4,580
South Dakota
$126
$534
$660
Tennessee
$1,332
$5,623
$6,955
Texas
$4,456
$18,814
$23,270
Utah
$419
$1,768
$2,187
Vermont
$107
$453
$560
Virginia
$1,459
$6,159
$7,618
Washington
$1,095
$4,621
$5,716
West Virginia
$435
$1,836
$2,271
Wisconsin
$1,036
$4,372
$5,408
Wyoming
$95
$401
$496
US Total
$59,578
$251,527
$311,105
September 2014
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