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The independently owned drugstore is one of the last surviving archetypes of America”™s downtowns, a place where customers are still known by their first names and specialty services such as home delivery are offered. Many are now carving their epitaphs, dying at the hands of mail-order prescriptions.
Those who provide mail-order drugs cite convenience and a consumer-driven business model that call the shots.
For years, Pravin Patel, co-owner of Sunrise Pharmacy in Yonkers, filled prescriptions for the 300 or so employees at nearby St. John”™s Riverside Hospital. But now half of them have stopped coming, due to a requirement in their medical insurance policy mandating them to order their prescription drugs by mail. “I”™m 10 feet away and they cannot get their medicine from me,” said Patel. “There”™s nothing I can do.” He noted that ordering drugs by mail is confusing to some people. Another disadvantage, in this poor neighborhood, is the possible theft of the package of drugs from the mailbox if the recipient isn”™t home.
William Halstead, owner of Vadala Pharmacy, in Highland, is in a similar boat. IBM and Central Hudson have both adopted insurance plans that require employees to obtain their drugs by mail. “The bottom line is, it”™s taken away 20 percent of my business,” said Halstead. The insurance companies claim “they”™re saving people money because the drugs are cheaper, but it”™s taking money out of the community.”
Furthermore, he said the pharmacy benefit managers (PBMs), which are the companies that manage the insurance drug benefit, are not playing fair. For example, they dictate that only the mail-order providers (which are owned by them) can fulfill 90-day prescriptions for maintenance drugs, which are required for long-term conditions such as high blood pressure and diabetes. In insurance plans that include local pharmacies as an option, the pharmacies are restricted to 30-day prescriptions, which would require three co-payments from the customer instead of one to cover the equivalent period. This 90-day requirement for mail order also forces customers into an arbitrary time frame, making them buy a volume of drugs they may not need.
Another pharmacist who”™s impacted by competition from mail-order services is Mark Rauchwerger, owner of Circle RX, in Mount Vernon. Among the growing number of insurance plans that require mail order is that of the Mount Vernon teachers”™ union. “I used to have all the teachers, but they stopped coming last year because mail order made it easy. It”™s terrible. I”™m trying to shift out of prescription drugs.” Rauchwerger said he used to hire a pharmacist to help out, but now he can”™t afford it. When the PBMs “force people to do mail order, we don”™t get a choice. The pharmacy was the moneymaker years ago, but now I make more money in the front store ”“ on Western Union, sundries and Lotto.”
Rauchwerger said he thought the mandatory mail-order requirement was also stiffing customers, even though it appeared to be cheaper. The PBMs “are pressuring customers economically. They give a large quantity for a small co-payment and don”™t allow us to do that.” Plus, people miss having the opportunity “to ask the pharmacist questions and make sure they have the right medicine.” He said his former customers “all want to see me but now they can”™t. And since they”™re not coming in for their prescription drugs, they aren”™t buying anything else here.”
Selig Corman, director of professional affairs at the Pharmacists Society of the State of New York, based in Albany, said that three PBMs ”“ MedCo Health Solutions Inc., Express Scripts and CVS Caremark Corp. ”“ control 90 percent of the prescription insurance business. “The large majority of the population gets their prescriptions paid through a prescription benefit plan, including all municipal workers and most corporate employees. Even private insurance plans have a segment of health care in which the pharmacy bills one of the insurance plans.” Corman said while the mail-order service began as an option 10 years ago, the trend among insurance providers is to mandate it.
Corman noted the hospital, which is paying for the prescription, “is under the impression that it is going to be cheaper for it to pay for mail-order service as opposed to having the prescription provided at a local pharmacy. But we”™ve documented many cases in which it is less expensive for the employer to have plan services provided through a local pharmacy.”
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Although there is little public awareness of the PBMs, they currently account for 20 percent of all prescription drug sales, a share that is quickly growing, said Charles Sewell, senior vice president of government affairs at the National Community Pharmacists Association, based in Alexandria, Va., and representing 23,000 independently owned pharmacies. However, they have attracted the attention of numerous state attorneys general and have been the target of many lawsuits. One PBM was found guilty of defrauding the Ohio state teachers”™ pension system. Usually, however, the PBMs settle out of court, at a collective cost of $300 million in the last two years, said Sewell.
Basically, the PBMs make a convincing sales pitch to company HR departments that by administering the prescription drug benefit in exchange for a fee, they will save the company on costs and the hassle of figuring out this complex portion of their insurance policy. But the lawsuits point to the fact that they often wind up costing the company more, according to Sewell.
Sewell said one way the PBMs make money is from the spread between what they charge an employer and what they actually pay for the drug ”“ a huge area for abuse, given that the employer has no idea what the PBM paid the pharmacy. “There”™s no transparency,” he said.
Sewell said the PBMs also get rebates from the drug manufacturers “to drive customers to their high-volume drugs that aren”™t selling as well, which are usually the highest-priced brand name drugs.” He noted that two of the PBMs were once owned by drug manufacturers.
Sewll said the PBMs also use “coercive” tactics to drive customers to their mail-order options, initially charging less, then switching the person to a higher-priced drug. He noted that while “the community pharmacy works hard to drive patients to lower-cost generics, the PBMs are interested in driving people to higher-cost health-care solutions. Look at their 10Ks; these are the most profitable companies in America.” One reason, he said: “The PBMs sit on the money and make their interest on the float. They hold off paying as long as possible.”
A bill introduced in the U.S. Senate, S. 1954, would require the PBMs to pay Part D pharmacy reimbursement claims submitted electronically within 14 days and paper claims within 30 days. The bill also promotes plan-price transparency by requiring Part D plans to disclose their maximum allowable cost pricing on generic medications, among other provisions.
“The independent is finding it tough to survive. It didn”™t happen until the rise of the PBMs, then Medicare Part D,” said Sewell. “Our point is it”™s all about the patient. We want to get them medicines on a timely basis and in a cost-efficient way, in the safest way possible.”
CVS Caremark reported record revenues for the second quarter of 2007, with net revenues of $20.7 billion, up from $10.6 billion reported for the second quarter the year before. Net earnings increased 114.1 percent compared with the same period in 2006, reaching $723.6 million in the second quarter of 2007.
Carolyn Castel, director of corporate communications at CVS Caremark, based in Woonsocket, R.I., said mandatory mail-order service is the decision of the employers and health insurance plans. It “would be an option to provide convenience” to the numerous employee groups served by the firm, but “as well there are opportunities to use retail” through CVS Caremark”™s network of 60,000 pharmacies. “We”™re looking at the importance of the consumer being able to determine the best option. It”™s the benefit design requested by the employer groups and health plans that dictate what we offer the employee.”
The appeal of mail order, she added, was “the cost savings plus the issue of convenience if it”™s an older person with mobility issues.”
The CVS Caremark merger, which happened earlier this year, has also raised questions about unfair competition from the drugstore chain. Castel refuted the notion that the merger would result in a competitive advantage. “Caremark will continue to have a wide network of pharmacies, and CVS will continue to work with other PBMs,” she said. “We”™re very conscious of competitive issues and have firewalls in place so there”™s no inappropriate sharing of information.”
