Pharmacy benefit manager Caremark will look to over-the-counter substitutes for branded prescription therapies to generate savings in 2006, according to CEO Mac Crawford.

The strategy builds on the Nashville firm's existing efforts to promote generic drugs, and in some cases OTCs, in place of branded prescription options for its customers.

"This is a big, big push from our side," Crawford stressed during a Jan. 9 presentation at the 24th annual JPMorgan Healthcare Conference in San Francisco.

"We are encouraging generic and OTC products when clinically appropriate and cost effective."

Insurers and other payers have looked to nonprescription drugs for savings in classes such as antihistamines and proton pump inhibitors where both Rx and OTC options exist.

Over-the-counter availability of Schering-Plough's Claritin and Procter & Gamble's Prilosec OTC have led to formulary changes for their prescription competitors, and in some cases coverage of the OTCs (¹ Also see "Prilosec OTC Switchback: Plans Should Look To OTCs For Savings, Study Says" - Pink Sheet, 20 September, 2004., p. 4 and ² Also see "Health Plans Initiating Coverage Of Claritin, Prilosec OTC – PBMI Survey" - Pink Sheet, 1 November, 2004., p. 3).

Caremark will increase the emphasis on OTCs through its pharmacies, Count On Generics campaign and other services in the coming year.

"You will see us make a move...into more of the OTC lines, offering OTCs through our pharmacies to the participants in the future," Crawford said. "This is something that we are just now beginning to roll out, so it is in its infant stages."

"How well it goes, where it goes, we will see," the exec allowed. "But there's no reason that we don't distribute more than just branded scrips, branded medications, or medications that require a prescription through the mail-order facilities and the distribution capabilities that we have."

Caremark already has created a web tool for customers "that highlights the therapeutic alternatives for prescription products" both within drug classes and across classes, he noted.

"This is one of the first programs available to the consumer to be able to do this, which does include both generic and OTC products."

In 2006, Caremark plans to expand the communication of "in-class/cross-class opportunities" to customers, and improve plan participant accessibility to OTC drugs through its mail-service system, Crawford said.

A new retail approach may provide Caremark with another opportunity to drive customers toward lower-cost treatments; the firm also plans to expand its program of on-site pharmacies at Fortune 500 employers in the coming year, Crawford said during the presentation.

The development is a new twist in the ongoing battle for market share between retail drugstores and PBMs, which until now have competed strictly via mail order.

It is "something that we started a couple of years ago that we're getting to see a lot of traction out of now. We're actually putting pharmacies on-site in customer locations that have anywhere from 2,000-3,000 participants or greater in these locations."

Caremark builds the on-site pharmacies in rented space on the grounds of self-insured employers' campus facilities. The company maintains that in addition to the same face-to-face interaction with pharmacists as with third-party retail pharmacies, the system offers better pricing and a more convenient workplace location.

The PBM launched a pilot in 2004 at one of its mail-order call centers. The company said it has since launched another four and a number of other customers are interested in the idea. "We expect to have 10 by the end of the year," Crawford noted.

Crawford said he does not believe the on-site pharmacy initiative "is going to deliver a lot of financial bottom-line impact, but it is going to make, number one, us closer to the client and, number two, help drive not only generics but mail-order penetration as well."

[Editor's note: " ³ The Pink Sheet " contributed to this story. For more information call 1-800-332-2181.]

- Christopher Walker

Caremark Hopes OTC Alternatives To Rx Drugs Will Lead To Savings In 2006

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