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The money is in the details, and the consultants at Trivantage Pharmacy Strategies LLC know that well.

Trivantage, based in Wauwatosa, offers clients an insider's perspective into the arcane business of pharmacy benefit managers the companies that administer prescription drug plans.

That's because the firm's founders once ran one.

"We said, Let's take our knowledge over to the client side of the table,' " said Matthew Zirpoli, one of Trivantage's founders.

Their detailed knowledge of how pharmacy benefit managers, or PBMs, make money has won the small firm clients such as Intel Corp., Marriott International Inc., Goodyear Tire & Rubber Co., Merrill Lynch & Co. and Circuit City Stores Inc.

Pharmacy benefit managers which handle about two-thirds of all prescriptions written in the United States negotiate discounts with pharmaceutical companies and retailers and administer prescription drug plans for insurers and employers.

There are other consultants who have worked for pharmacy benefit managers.

"The big thing that differentiates us," Zirpoli said, "is we started a company from ground zero."

In the mid-1990s, Zirpoli and Joseph Coffini Trivantage's founders were recruited by Shopko Stores Inc. to start what became ProVantage Health Services Inc., a pharmacy benefits manager.

ProVantage proved to be a huge success. In 1999, when Shopko took the company public in an initial stock offering, ProVantage was on track to post sales of $902 million. It briefly traded on the New York Stock Exchange before being bought by what is now Medco Health Solutions Inc.

Starting ProVantage gave Zirpoli and Coffini a detailed knowledge of a business that for many employers is shrouded in mystery. Managing prescription drug plans is an esoteric, complex business.

And in recent years, pharmacy benefit managers have come under criticism for being less than straightforward about where they make their money.

Critics contend the companies pocket some of the discounts and fees they get from pharmaceutical companies that should be passed on to their customers.

Because the discounts negotiated with pharmaceutical companies are confidential, pharmacy benefit managers' customers can have a tough time knowing for sure whether they are getting the best price. In addition, the managers handle huge volumes of relatively small claims. That can make it difficult to track costs.

"A nickel here and nickel there, it adds up to be real money," said David Kreling, a professor at the School of Pharmacy at the University of Wisconsin-Madison.

The three largest managers Caremark Inc., Medco and Express Scripts Inc. are being investigated by state or federal prosecutors for the way they operate.

Best deals wanted

Pharmacy benefit managers note that they have saved their customers billions of dollars on prescription drug costs. As prescription drugs became a larger share of total health care costs, employers began questioning whether they were getting the best deals possible.

"There was just a huge need in the industry for some independent people with a real strong knowledge of the industry and their methods," said David Armstrong, pharmacy benefits director for WPS Health Insurance in Madison.

He was surprised by some of the nuances such as how discounts, particularly for generic drugs, could be overstated that Trivantage noted.

"You need to know how to ask the right questions," Armstrong said.

Consider the price of generic drugs. Most contracts are pegged to "maximum allowable cost." The catch is that can change daily.

"Most clients are aware that things are not what they seem," said Melanie Caldwell, a senior consultant with Trivantage. "But they don't know the extent of it."

Few employers have the detailed understanding to know how the contracts should be written, Zirpoli said. When negotiating contracts for its clients, for instance, Trivantage looks at more than five dozen "price points."

"You can no longer let the PBMs set the rules," he said. "And that's the way it happened for years."

Trivantage estimates that it saves its clients 5% to 23% on prescription drug costs. For some clients, that has translated into savings of as much as $15 million money that falls right to the bottom line.

"Once you do that," Zirpoli said, "you have a friend for life."

The firm, which has nine employees, has about 100 clients, including subsidiaries of Assurant Inc., The Guardian Life Insurance Co. of America and Principal Financial Group Inc.

Its clients in Wisconsin include Schneider National Inc., Snap- on Inc. and Kohl's Corp.

"We just wanted to make sure we truly understood what we were getting," said Lynne Hyer, manager of benefits strategy for Schneider National, a transportation company in Green Bay that employs more than 25,000 people in North America.

Auditing drug claims

One of Trivantage's services is auditing prescription drug claims by using software the firm developed.

"You had to have it to validate whether the PBMs were doing what they said they were doing," Zirpoli said.

Last year, the firm audited 34 million pharmacy claims totaling $2.2 billion in health care spending. Companies are now hiring the firm just to do audits.

"We have been able to get money back for our clients money that should have been theirs to start with," said Caldwell, the senior consultant.

The firm doesn't bill hourly. Instead, clients pay annual retainers that typically range from $50,000 to $275,000, depending on the services and the company's size.

Trivantage is affiliated with Frank Haack & Associates Inc., an insurance broker and benefits consultant. Two of Frank Haack executives own half of Trivantage.

The goal is for Trivantage to have 25 to 30 employees in five years, Zirpoli said. The challenge will be finding people with an understanding of the business.

That could be a bigger challenge than finding new clients.

"We've got a good thing here," he said. "I'm not worried about growth. It will happen."

Copyright 2005, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Copyright 2005 Journal Sentinel Inc. Note: This notice does not apply to those news items already copyrighted and received through wire services or other media
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