Non-Environmental Cost-Benefit News

Stamford officials say they will save taxpayers more than $500,000 annually by buying prescription drugs in bulk with a statewide coalition of municipalities and school districts.

The combined buying power of 51,000 employees from 11 municipalities and two school districts is expected to shave 11 percent off Stamford's prescription drug costs.

Last Tuesday, about 2,500 city employees and retirees switched from Health Net to the Connecticut Public Section Coalition's plan with Medco Health Solutions Inc. of New Jersey. The move is expected to save the city about $500,000 a year in drug costs and $120,000 in administrative costs.

"This doesn't assume any increase on co-payments, and there are no restrictions on drugs," said Dennis Murphy, director of the city's human resources division. "The magic here is simply the savings of buying in bulk."

Employees' co-payments, which range from $5 to $15, depending on the drug, have stayed the same, he said.

Officials say Medco, a spin-off of Merck & Co., can negotiate lower prices with pharmaceutical companies because it buys in massive quantities and gets a volume discount.

The savings will be passed to employees who must contribute to the cost of their medical coverage, Murphy said. Employees now pay $4 to $12 a week for single coverage and $10 to $31 a week for family coverage. Besides a traditional health plan, city employees get dental, eyeglass and prescription drug coverage.

Prescription drug costs have been rising more than 10 percent each year and cost Stamford about $4.5 million a year. The city is self insured, which means it reimburses its prescription drug plan administrator for every drug purchased.

In Norwalk, where all city employees except firefighters switched from Cigna to the Medco plan Jan. 1, Mayor Alex Knopp said the volume discount is expected to save $234,000 a year -- 12 percent of the city's prescription drug costs.

Danbury, Waterbury, Bridgeport, Middletown, Meriden, East Hartford, Manchester, Windsor and Windsor Locks are part of the coalition. Participating towns were asked to contribute $7,500 each to cover the cost of bidding and cost-benefit analysis.

East Hartford Finance Director Michael Walsh said his town would save 8 percent by switching 1,500 town and school employees to the plan.

"For a $7,500 investment, we will receive a projected $156,000 return," he said.

East Hartford was set to switch to Medco when its existing drug plan administrator, Blue Cross Blue Shield, made a last-ditch effort to keep the contract and lowered its rates, Walsh said.

He said he still is inclined to go with the coalition's plan, though he wants to see Blue Cross Blue Shield's best offer before he signs.

The coalition's plan does not depend on any one municipality's participation, Walsh said -- anyone can opt out if it gets a better deal elsewhere.

Stamford officials, who organized the coalition, said they hope word spreads about the volume discount and other towns sign on.

"The more that join in, the more benefits that are realized," Murphy said.

Stamford personnel specialist Fred Manfredonia said about two dozen municipalities were interested in the coalition but only 11 signed on. Part of the challenge is that each municipality has multiple labor contracts and different purchasing requirements, he said.

The Stamford Board of Education was among those invited to participate but declined, he said. Board of Education Director of Human Resources Scott Macdonald did not return a phone call last week.

Manfredonia said the coalition's next step is to research the cost of buying life insurance in bulk.

By Donna Porstner
The Stamford Avocate www.stamfordadvocate.com
http://www.stamfordadvocate.com/news/local/scn-sa-drugs6feb07,0,1806314.story?coll=stam-news-local-headlines