In this issue: Arxcel Study Generic Pricing FDA Update Arxcel, Inc. 4390 Quinby Dr. Suite D Hamburg, NY 14075 (716) 646-9292 (716) 646-6985 Fax www.arxcel.com info@arxcel.com ARXCEL can help with: Plan Design Proposals Clinical Analysis Product Line Development Sales & Marketing		Spring 2003  Arxcel News Brief  ARXCEL STUDY REVEALS SECRETS OF SKYROCKETING DRUG COSTS Click here for a complete copy of the 2003 Arxcel Prescription Benefit Research Survey. Each year, Arxcel conducts a survey to gather industry information that is valuable to clients and industry professionals at large. This year's Arxcel Prescription Benefit Research Survey reveals significant trends regarding the rising costs of prescription benefits, possible solutions for the cost increases and the viability of the solutions available. Respondents identified direct-to-consumer (DTC) advertising and inflation as culprits of rising prescription costs. Solutions they recommend include greater cost shifting to patients and more judicious use of medicines. "The opinions held by employer executive leadership provides a sound foundation on how to measure what is going on in health care delivery," said Emanuel Levy, editor of Insurance Advocate, a 114-year-old newsmagazine serving the insurance industry. "The Arxcel interviews are a guide to what can be anticipated with respect to consumers' (with emphasis on employees') needs and how they may best be met in the ensuing year. Our readers are the insurance professionals who serve these consumers, and knowing what employers intend for their employees' health plans is valuable industry intelligence for all industry readers." The survey, conducted during March 2003 via personal interviews with executives throughout corporate America, revealed more than one third of respondents citing the largest role in escalating drug costs as DTC advertising and nearly one quarter citing inflation. Respondents were asked to identify potential solutions to slow down the increases in prescription drug costs. 82% recommended increasing member cost through tiered or higher co-payments and 72% recommended development of incentives to utilize mail order. "Respondents were split on whether the government should become involved in the management of rising prescription costs," according to Pamela Wegmann, principal of Information Matters, the research firm that conducted the survey. "We saw 52.5% favoring government involvement while 47.5% were against it. This is a significant shift from 2002, when 37% encouraged government involvement." PBM GENERIC PRICING REVIEW Recent research indicates that Pharmacy Benefit Manager (PBM) pricing practices for generic drugs is a growing concern among consumers. Popular opinion seems to suggest that PBMs are raising drug prices to increase their own profits. Prospective employers, drug pricing usually begins during the proposal process with a PBM. It is imperative to review the proposal closely, and to focus on pricing methodology particularly with regard to generic pricing. Maximum Allowable Cost (MAC) lists and default pricing for drugs not on the MAC list will have an impact on overall costs. It is common practice for PBM's to charge clients a different rate (based on the contract) than they pay the pharmacy. The difference between the two is the PBM's profit. We liken this to buying clothes at a department store. The store purchases the merchandise for one price and sells to the consumer for another. The difference is the store's profit. We have seen proposals in which a PBM proposes pricing that assumes a loss on brand drugs, but makes it up through a profit on generics. Assuming the profits are reasonable, we see this as acceptable industry practice. By taking this approach, the PBM and client have aligned objectives to encourage generic dispensing when appropriate. Arxcel assists it's clients by ensuring that the PBM's profit is fair and reasonable, while managing care and controlling costs. GOVERNMENT NEWS - PRILOSEC, LIPITOR, ZYRTEC & PROZAC PRILOSEC Omeprazole, the generic form of brand-name Prilosec®, was approved for over-the-counter (OTC) sale on June 20, 2003. This will allow for the self-treatment of frequent heartburn by Americans. Prilosec® is indicated for the treatment of heartburn that occurs two or more days per week. Prilosec® OTC's manufacturer will have 3 years of over-the-counter exclusivity because of the safety studies performed. Generic versions of the prescription product won't be available until the exclusivity is expired. LIPITOR & ZYRTEC The FDA has approved Lipitor® for treatment of hypercholesterolemia in children 10-17. They also approved Zyrtec® for the treatment of year round allergic rhinitis and chronic idiopathic urticaria in infants six months of age or older. PROZAC Approval was also received for Prozac® to treat major depressive disorder and obsessive-compulsive disorder in patients 7 to 17 years old. If you have questions regarding the coverage of Prilosec® for your plan, contact Arxcel at (716) 646-9292. © Arxcel, Inc.