The University Record, March 11, 2002

Pharmacy Benefit Plan Changes for 2003

By Vivian Byrd

The University will select and announce a new pharmacy benefit manager in late spring 2002 to manage the prescription drug portion of all its medical insurance plans. Prescription drug coverage no longer will be provided through University medical plans but through a separate pharmacy benefit plan.

Faculty, staff, retirees and their dependents will retain access to a comprehensive program when the University secures an external pharmacy benefit manager to administer its prescription drug program. Access to the same prescription drugs currently available will continue. In addition, it is expected that everyone will have the same pharmacy benefit plan regardless of the medical plan they choose. Some cost savings also are expected.

Beginning Jan. 1, 2003, prescription drugs can continue to be purchased through the network of more than 50,000 retail pharmacies or through the new expanded mail order service. All faculty, staff, retirees and dependents will receive a new prescription drug card. The University anticipates that the change in pharmacy benefit management will proceed with minimal disruption to faculty, staff, retirees and their dependents.

Over the past two years, the University has been studying prescription drug coverage and costs to determine the most effective means to maintain and enhance coverage while controlling costs that collectively impact employees and the institution. The Prescription Drug Work Group 2002 examined the current situation and presented options for the executive officers to review. Extensive input was gathered from the University community through focus groups, public hearings and a dedicated e-mail address. Educational articles appeared in the University Record, and a Web site provided information at

After careful consideration of the Work Group’s report, and extensive discussion and correspondence with the Senate Advisory Committee on University Affairs (SACUA), the decision has been made to consolidate pharmacy purchasing under a single pharmacy benefit manager.

Double-digit increases in pharmacy costs are expected to continue. However, the new design provides an opportunity to contain future growth in pharmacy costs and maintain a quality benefit for U-M faculty, staff, retirees and their dependents.

Oversight Committee

At the direction of the executive officers, an Oversight Committee will be established to determine future plan design, monitor quality assurance and outcomes, ensure privacy protection of individual information, and review which drugs are included on the preferred and the non-preferred drug lists. The committee will establish pharmacy management programs that will assist with improving patient care and reducing unnecessary cost.

Unlike most organizations, the University has the internal resources to create a unique working relationship with a pharmacy benefit manager. The Oversight Committee will capitalize on the expertise and experience of faculty and staff across campus. At least one member will be appointed in consultation with SACUA or the Committee on the Economic Status of the Faculty (CESF).

The Oversight Committee will review covered and excluded drugs, and recommend changes for consistent coverage for all participants in the University’s pharmacy benefit plan.

Highlights of the New Plan

The following highlights of the new pharmacy benefit plan apply to all participants who are enrolled in medical plans other than Blue Cross Blue Shield of Michigan/United:

Co-Payments—There will be a three-tier co-payment for prescription drug purchases. The three tiers include:

  • A $7 discounted co-payment for use of generic drugs;

  • A $14 co-payment for preferred brand drugs; and

  • A $24 co-payment for the brand name drugs that are selected and placed on the non-preferred drug list.

    It is estimated that only 5–10 percent of all drugs may be selected for the non-preferred list. Criteria will be developed to determine non-preferred drugs based on safety, efficacy and cost.

    This program offers members a range of options, including the opportunity to take advantage of the $7 discounted co-payment when a generic drug is available, or to pay $24 if the drug is on the non-preferred drug list. The vast majority of brand medications will be available on the preferred brand list. Approximately 40 percent of all medications purchased are generic drugs.

  • Coverage —Access to the same prescription drugs currently available will continue.

  • Safety Net—A new annual out-of-pocket maxi-mum will serve as a safety net for the 20 percent prescription drug co-insurance or the $7, $14 or $24 co-payments. Participants in this plan will have a $4,000 per person or an $8,000 per family per year out-of-pocket maximum.

  • Appeals—Physicians and participants will have access to an appeals process.

  • Mail Order—An expanded mail order program will provide the convenience of home delivery of maintenance medications in larger quantities than are currently available.

  • Education Programs—Consumer and physician education programs will be launched.

    Blue Cross Blue Shield of Michigan/United Major Medical Participants

    New convenience, expanded coverage and the above out-of-pocket maximum “safety net” improve the prescription drug portion of the Blue Cross Blue Shield of Michigan/United Major Medical plan (BCBSM/United).

    Faculty, staff and retirees enrolled in BCBSM/United pay a 20 percent co-insurance amount on prescription drug purchases, which will continue. Therefore, the BCBSM/United prescription drug plan will remain slightly different than for participants in other University medical plans.

    New Convenience—A prescription drug card will replace the current reimbursement process and create new convenience for participants in this plan. Active and retired faculty and staff members enrolled in this plan no longer will have to pay 100 percent of the prescription cost at the retail pharmacy and then submit a claim for reimbursement. After meeting the new $150 per person per year prescription drug deductible, they will pay the 20 percent co-insurance portion at the pharmacy, which includes a discount, and the claim will be filed automatically. The $150 deductible applies only to prescription drug purchases and does not count against the deductible for other major medical expenses. The $250 deductible for other medical expenses will continue.

    Expanded Coverage—Psychiatric drugs as well as oral contraceptives and devices for all participants in the BCBSM/United plan, not currently covered, will be covered under the new plan.

    Bargained-for Groups

    The University has many employees who are represented by labor unions and covered by collective bargaining agreements that contain provisions regarding health care and prescription drug coverage. The obligations set forth in those agreements will be honored. The leadership of each of the labor unions will receive individual communication from the University.

    Information Resource

    The Benefits Office will be charged with communication of information about the Oversight Committee and more specific details on the plan.