Prescription drug capitation: risk versus reward

The unpredictable past and future of the prescription benefit business has resulted in an acute interest by plan sponsors in the concept of capitation. Capitation is effectively an insurance policy, offered by the provider, which will guarantee the cost of the prescription benefit. Such guarantees relative to the cost of the plan are attractive to the sponsor because they minimize risk and facilitate rate setting for HMOs and PPOs--and facilitate budgeting for corporate sponsors. Is capitation a cost-effective win-win alternative to traditional average wholesale price-based arrangements?