An increasing number of states are turning to a Downers Grove-based company for help with reining in their prescription drug budgets.
First Health Group Corp. manages drug benefits in nine states and the District of Columbia under their federal/state Medicaid health insurance programs for the poor. Increased usage of prescription drugs is one big reason that state Medicaid costs are increasing by 10 percent or more annually. At the same time, however, states’ tax revenues are rising 5 percent or less, industry analysts say.
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First Health works to ratchet down drug costs by closely monitoring drug utilization through mail-order programs or working with states to implement preferred lists of drugs, known as formularies.
“Managing drug benefits is our sweet spot in the public sector business,” said Joe Whitters, First Health’s chief financial officer.
The niche is helping First Health gain recognition outside of its main business line of administering health plans for self-insured employers.
First Health stock, which closed last Friday down $1.19, at $40.63, is still up nearly 40 percent from its 52-week low.
“A lot of times, states don’t have the expertise and are just paying the [drug] claims,” Whitters said. “They don’t have the pharmacists, the systems or the medical claims management business.”
Yet cost controls often become political battles before states decide to go outside to companies like First Health for help.
Pharmacists often revolt against state managed-drug programs, fearing that their revenues will drop as mail-order prescriptions are encouraged.
First Health tries to stay out of the political fray by waiting for governments to seek requests for proposals rather than approaching states with the idea. State governments also decide what drugs will be covered and the amount of co-payments.
Administering Medicaid drug programs accounts for less than 10 percent of First Health’s $505 million in annual revenues, but its public sector business could grow larger if Medicare expands the list of covered drugs.
“We think we are uniquely positioned to provide services in the public sector,” Whitters said.
Pay the piper: The financial pinch on Illinois hospital bottom lines from reductions in government reimbursement doesn’t appear to be affecting these health facilities when it comes to political donations.
The Illinois Hospital and HealthSystems Association political action campaign raised a “record-breaking” $221,428 through its fundraising campaign last year from its membership of 200 hospitals, according to the Naperville-based trade group’s newsletter.
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