Nobody likes static cling, but most people can put up with it now and then. Not the folks at Medco’s automated pharmacy in Willingboro. They hate static cling. For them, much more is at stake than a sock sticking to a pillowcase.
Medco’s Willingboro facility fills more than one million prescriptions a week. A dizzying network of high-speed conveyor belts, scanners, chutes, chambers, and robotic arms whips each order from inception to completion in as few as twenty minutes. Before the pills are plopped into the bottle, the cap is zapped with ionized air. This eliminates static electricity, which might otherwise make pills stick to the machinery or to the mouth of the bottle—possibly messing up the count or mixing one med in with another. Not good for business.
Defeating static cling is just one of many details Medco has mastered to become the nation’s biggest PBM, or pharmacy benefit manager. The 280,000-square-foot Willingboro facility, the equivalent of six football fields, is the largest of the Franklin Lakes-based company’s three dispensing centers.
As baby boomers become senior boomers, raising Americans’ median age from 32.9 in 1990 to 36.4 in 2006, the pharmaceutical industry rises with them. (In that time, Jersey’s senior population increased by more than 100,000, and 1.1 million people in the state—13 percent of all residents—are now 65 or older.) Prescription drug sales in the United States reached a record $274.8 billion last year. Mail-order drugs accounted for $42.2 billion, or 15.4 percent, of that total, up from 12.7 percent in 2002, according to data from IMS Health, a health care information company.
Just as the chain megastores stepped on the throats of local pharmacists, the mail-order industry is now putting the squeeze on the chains. Mail-order sales grew 47 percent nationally from 2003 to 2006—more than twice the rate of growth for drugstores such as CVS and Walgreens. Medco’s mail-order revenues (it also has retail partnerships) hit a record $16.1 billion last year, accounting for about 36 percent of all mail-order sales in the nation. Nearly half of Medco’s prescriptions are filled at Willingboro.Despite the dazzling robotics and the two miles of conveyor belts, human beings are still essential. On one vast wall, the diplomas and licenses of Willingboro’s 138 full-time pharmacists form a mosaic of human authority. Though medications are delivered to the plant by the pallet-load, individual pharmacists are required to hand-fill the 1,920 metal dispensing hoppers. Before a pharmacist can pour a jug of pills into what senior manager James R. Flynn calls “a very high-tech gumball machine,” he or she must scan the bar codes on his or her ID badge, the drug bottle, and the counting equipment at least five times, and visually confirm the pill against a sample affixed to the front of the laser counting device.
The filled bottles move down the line to be checked by humans for broken or wrong pills or contaminants before the lid is robotically screwed on. (After 90 minutes, the inspectors rotate away from the monitoring station to stay fresh.) At the end of the process, each addressed package is sorted by zip code and dropped into the appropriate blue postal bag. In all, about 1,200 people work at the facility.
“The automation allows our pharmacists to focus on what really matters, the patients we serve, their safety, and the quality of their care,” says Dr. Glen D. Stettin, senior vice president and general manager of the Clinical and Therapeutic Solutions Group. “They can spend more time counseling patients, evaluating prescription orders, and resolving issues with physicians.”
Among the mountains of small round objects regularly delivered to Willingboro are piles of M&Ms (which are made by another New Jersey company, M&M/Mars). The candies are not for munching. Rather, Medco engineers use them to test new equipment before it is put into service.
The result of all this effort is a much lower error rate compared to retail pharmacies. A 2005 report in the journal Pharmacotherapy found that new prescriptions at retail pharmacies had a dispensing error rate of 3.21 percent, with errors defined as any discrepancy between the physician’s written order and the filled prescription. At mail-order pharmacies such as Medco, that dispensing error rate is 0.071 percent—45 times lower than retail.
This benchmark earned Medco the 2004 Ernest A. Codmon Award from the Joint Commission on Accreditation of Healthcare Organizations—making it the first pharmacy benefit manager to receive that recognition. J.D. Power and Associates ranked Medco highest in overall customer satisfaction in pharmacy benefits and services four times. In 2005, Fortune named Medco one of its most-admired companies.
Medco officials have had to swallow a couple of bitter pills. Last year the company agreed to pay $155 million to settle fraud allegations, dating to 1998, brought by the U.S. Attorney’s Office of the Eastern District of Pennsylvania. These included accusations that Medco sought kickbacks from drug makers to promote their products and switched prescriptions without physician or patient consent. Medco did not admit wrongdoing, saying it was settling after seven years of inquiry because it made best business sense.
Medco recently landed the account of the Blue Cross and Blue Shield Association’s Federal Employee Program, making it the specialty pharmacy benefit program for more than four million federal employees, retirees, and their families. “We’ve moved on from that chapter,” spokeswoman Soraya Rodriguez-Balzac says of the litigation, “and feel vindicated by the [federal government employees’] award.”
More recently, Medco faced trouble from within. In September, a computer administrator at Medco’s Fair Lawn office pleaded guilty to a count of transmitting a computer code with the intent to cause significant damage. He planned to wipe out patient data by planting a “logic bomb” in the company’s computer system. The insidious program, which did not activate, was designed to delete data from 70 servers, erasing vital prescription information. Yung-Hsun Lin, of Montvale, faces up to three years in jail.
The idea of a long-distance relationship with the pharmacist may not appeal to everyone, but for many, the attraction to mail order comes down to price. In 2006, patients whose insurance carriers subscribed to Medco faced only an average 2.8 percent increase in the cost of prescription-drug benefits, compared to a national average of 6.5 percent, according to the Centers for Medicare and Medicaid Services. In 2003, the U.S. General Accounting Office found that, compared to prices paid at retail pharmacies, the average customer paid 27 percent less for brand-name drugs and 53 percent less for generic medications through mail order.
Medco’s wholesale buying power as the largest pill dispenser in the United States helps keep costs low. And the substitution of cheaper generics after a brand name’s patent has expired is a move Medco aggressively makes (with doctor and patient okay). Generics accounted for 55.2 percent of the drugs Medco dispensed in 2006, and the company estimates that its clients saved more than $390 million through the generic equivalents that hit the market that year alone. From 2007 to 2011, at least 60 more brand-name patents—accounting for about $53 billion in U.S. drug spending—will expire, opening the door for more generic equivalents.
The mail-order boom is also related to the needs of the growing number of patients with chronic conditions such as diabetes or heart disease. This year, Medco merged with PolyMedica Corp., the country’s largest maker of diabetes supplies. Only half of Medco’s patients have chronic or complex conditions, but 96 to 98 percent of the company’s sales come from those patients.
To better interact with those long-term patients in particular, Medco launched Therapeutic Resource Centers last year. Within those centers, pharmacists specialize in fields such as oncology or cardiology, and patients with chronic ailments are directed to an expert in that field. Pharmacists can work with the patient and doctor to determine the best (and least expensive) drug regimen. “The only other place you find that kind of specificity,” says Flynn, “is at a hospital.”