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FT: New Scheme To Lower Cost Of Prescription Drugs For Caterpillar Staff

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A new health plan at US heavy equipment maker Caterpillar Inc. (CAT: Quote) will lower cost of prescription drugs and steer employees towards pharmacies operated by retail chain operator Walmart Stores Inc. (WMT: Quote), and drugstore chain Walgreen Co. (WAG: Quote), reported the Financial Times Sunday.

The Peoria, Illinois headquartered Caterpillar reportedly said that the new direct scheme used "transparent cost-plus pricing to eliminate unnecessary and hidden costs in the prescription drug supply chain, in turn lowering Caterpillar's cost to purchase prescription drugs".

Walmart and Walgreen will charge Caterpillar based on the wholesale price they pay for each individual drug, introducing more transparent pricing than the systems used by most large US employers.

The plan, which is expected to be implemented effective January 1, will lower payment for the 120 thousands employees, dependents and pensioners covered by Caterpillar's health benefits.

Traditionally, many companies contract with pharmacy benefit manager or PBM, such as Medco or Express Scripts, to negotiate discounts from manufacturers on their bulk prescription drug needs.

The PBM then charges the employer a price that is different, usually higher, than the price charged by the pharmacy that fills the prescription.

Caterpillar, which spends about $150 million annually on prescription drugs for its employees, tested a pilot scheme for the program with Walmart last year, with Walgreen announcing its participation this summer.

Walmart said the "cost-plus" model could save employers 30% to 35% of the cost of non-branded drugs with some savings also possible on branded drugs.

Members of the Caterpillar health plan will be able to obtain basic prescriptions for free at Walmart and Walgreen, in place of the earlier $15 co-payment previously required. The plans' co-payments on more expensive prescriptions of $20 and $35 will be half the cost of going elsewhere.

Walgreen said it would also offer Caterpillar health plan members discounts on non-prescription purchases at its stores.

The two retailers together operate more than 10 thousands pharmacies across the United States and 85%of Caterpillar's plan members live within 10 miles of a branch, the report noted.

CAT rose $0.01 or 0.02% and closed Thursday's regular trading session at $58.33. WMT rose $0.28 or 0.53% and closed at $53.60 and WAG at $37.48.

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by RTT Staff Writer

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