Posted on 01/01/2005 3:38:06 PM PST by neverdem
Employer health plans across the country are forcing millions of consumers to change their drug-buying habits. And one side effect could be the decline of the neighborhood drugstore.
Instead of picking up their medicines at a local pharmacy, growing numbers of consumers will be required - starting this month when new health plans take effect - to buy dozens of widely used drugs, like insulin for diabetes or Lipitor to lower cholesterol, by mail order.
Employers and the companies that manage prescription drug insurance coverage favor mail-order pharmacies because they can get lucrative rebates and deep discounts from drug makers when they buy in volume. Those savings, which are said to amount to hundreds of millions of dollars a year, can then be shared with employers and health plans.
Distributing drugs by mail order also gives the drug-insurance managers - known as pharmacy-benefit managers - more control over which drugs are used, because they can ask doctors to change prescriptions before the drugs are delivered.
Across the country, many state and city governments, as well as private employers, already require employees to obtain their medications for chronic conditions through the mail. Early last year, General Motors, Ford, DaimlerChrysler and the United Automobile Workers introduced a mandatory mail-order requirement, which now applies to more than two million auto industry workers and retirees.
As drug costs continue to rise, the changeover is accelerating. The switch has already been met with resistance from some consumers who complain that they are losing the help of a knowledgeable, trusted friend - their local pharmacist. For independent pharmacists who depend on walk-in business, the shift to mail-order prescriptions can be devastating.
"It's going to kill the little guys," said Howard Baskind, owner of Prospect Gardens Pharmacy in the Park Slope section of Brooklyn. "We have a lot of teachers," he said.
The health plan of the United Teachers Federation in New York changed its rules last spring, forcing its members to turn to mail order for medicines for chronic conditions. Prescriptions for chronic conditions like some heart diseases, blood pressure problems and thyroid deficiency account for 40 percent of all retail drug sales.
Mail-order drug sales rose to $32.5 billion in the 12 months ending in September, a 16 percent increase compared with the same period in 2003, according to IMS Health, a pharmaceutical consulting company.
The big drugstore chains - Walgreen, CVS Pharmacy and Rite Aid - have said that they have already been hurt by the move toward mail-order sales.
But the hardest hit are independent drugstores, which lack the big chains' ability to demand discounted wholesale prices on generic and over-the-counter drugs. In Michigan, the effect of the auto industry's rules has been immediate.
"I was down 700 prescriptions in June," said Jack Poll, who closed Pfeffers, a 76-year-old pharmacy in Wyoming, Mich., outside of Grand Rapids, in September. Many of his customers were retired workers from a nearby former General Motors factory.
Pfeffers used to fill 6,000 prescriptions a month before the auto workers switched to mail order, Mr. Poll said. Like many drugstores, it was already under pressure from low-paying managed care plans and competition from Internet pharmacies and drugs imported from Canada, but "the U.A.W. contract really precipitated the closing," Mr. Poll said.
At least 30 pharmacies in the state were closed or sold to chains last year, according to the Michigan Pharmacists Association, a professional group that is lobbying the state legislature for a prohibition on making mail-order prescriptions mandatory.
Political pressure, however, is unlikely to reverse how drugs are purchased.
More than half of large employers will require mandatory mail-order drug purchasing in 2005, said Helen Darling, president of the National Business Group on Health, which represents more than 200 companies that provide benefits for 45 million people. She estimated that about 30 percent of the companies were already in mandatory mail plans. The New York Times, which has required nonunion employees to order medications for chronic conditions by mail for several years, recently added a mandatory mail pharmacy requirement for union employees.
"It's definitely a trend," Ms. Darling said.
General Motors, which spent $1.3 billion on prescription drugs for its workers and retirees in 2003, has been trying for years to persuade its employees to order prescriptions by mail. The auto companies have made mail order mandatory for more than 150 drugs for chronic conditions. The requirement applied first to nonunion workers and retirees, and was expanded in January 2004 to cover all 1.1 million people eligible for drug benefits from G.M. after the auto workers union accepted the idea.
Cost was only one of the considerations, said Cynthia Kirman, director of pharmacy in the G.M. corporate benefits office. Besides saving money, she said, the mail service is a convenience for retirees who go south in the winter. Mail also makes it easier for Medco Health Solutions, G.M.'s pharmacy benefit manager and the nation's largest mail-order pharmacy operator, to help monitor elderly patients' use of drugs like the tranquilizer Valium, which could be addictive, she said.
Retired auto workers like Mary L. Ettinger, 71, however, are unhappy about the change.
Ms. Ettinger, who used to work on the assembly line at Oldsmobile, said the company and her union "sold me down the river."
"My biggest worry is my insulin," said Ms. Ettinger, who has diabetes and also takes medicine for back problems that she said resulted from her time "pushing engine heads down the line." For her, shipping insulin makes little sense when she can pick it up at the drugstore that she has patronized for years.
Instead, a delivery truck drops off the insulin, chilled by gelatin packs in a foam cooler, at the front door of her house in Lansing, Mich. When she complained that cold packs were warm, possibly compromising the insulin, the customer service person at Medco offered to send a new batch - and charge her for the shipping, she said.
"They just don't care, period," Ms. Ettinger said. After a reporter called Medco to ask about her complaint, Medco promised Ms. Ettinger that it would notify her before each insulin shipment. Ms. Ettinger also said she finds it "a little scary" that other pills are left in her mailbox on the street. A passerby could steal the container, which rattles when shaken because the pills are shipped without protective cotton, she said. But Stephen Heller, 60, a retired senior manager at Verizon Communications, who receives a painkiller for arthritis in a mandatory mail program from Medco, said he was "very happy with the service," which he used several times last year. When his doctor's office was slow in completing paperwork on the order, Mr. Heller said, a representative from Medco called to offer to reimburse him if the delay forced him to pay a higher price at a pharmacy.
Consumers who use mail order for drugs for chronic conditions are often required to buy a 90-day supply, and typically pay a smaller co-pay amount on a 90-day order than they would pay at a pharmacy for three 30-day prescriptions.
Pharmacy benefit managers like Medco, Caremark Rx and Express Scripts check the customers' eligibility and handle payments to manufacturers and stores electronically, for which they receive fees. But they make most of their profits by selling drugs by mail order, according to Wall Street analysts.
These companies buy drugs from manufacturers at discounted prices and are paid for them by employers and other health plans, as well as members of the plans.
Lawrence Marsh, a health care securities analyst at Lehman Brothers, estimated that Medco, Caremark and Express get 7 percent to 8 percent of their annual revenues, about $500 million total, as their share of rebates from drug makers, mainly through mail sales.
The pharmacy benefit managers say that they inform the health plans about the rebates they receive from the drug makers, but Sean Brandle, a health benefits expert with the Segal company, a benefits and compensation consulting firm, said that not all of this money was passed along and the pharmacy managers' actual costs were hard to determine. The benefit managers, he said, "would never disclose their actual purchase cost of a drug at mail order."
Medco said its mail sales rose to $3.4 billion in the third quarter, up 21 percent from the same period in 2003. Express Scripts' mail-order sales increased 41.7 percent, to $1.4 billion, in the three months ending Sept. 30. Caremark, which in March bought AdvancePCS, a big pharmacy benefits manager, doubled its mail revenues to $2.19 billion in the third quarter, a prime reason, it said, for a 41 percent increase in quarterly profits.
These results from mail orders, not surprisingly, are considered a serious threat by drugstore chains, which are fighting back. "Mom-and-pop stores are going out of business," said Meredith Adler, a retail drugstore analyst at Lehman Brothers. "But the chains would like to play in the mail-order game."
Walgreen and CVS, the two largest chains, have come up with defensive tactics on several fronts. Walgreen, for example, has created its own pharmacy benefit management unit to serve health plans, with a network of 40,000 pharmacies, including 4,700 Walgreen stores, to try to compete with companies like Medco.
Walgreen offers customers a choice of buying a 90-day supply by mail service or in the stores, said Michael Polzin, a company spokesman. The chain also uses MedImpact, another drug benefit manager, that arranges for discounted 90-day prescriptions that can be picked up at a drugstore. MedImpact offers that choice to health plans at the same price as mail-order service.
Walgreen saw an opportunity to announce that it would no longer fill orders for state employees in Ohio at any its 161 Ohio stores after state employees switched their mandatory mail contract from Medco to Express Scripts in 2004.
"If we become aware of any mandatory features as contracts take effect, we will drop them," Mr. Polzin said. The stores said they also would not accept drug cards from Ohio state employees for short-term medications like antibiotics, even though those drugs are not on the mandatory mail order list.
CVS, which has 5,300 stores, has also stopped serving a few health plans that have mandatory drug mail-order provisions, said Dave Rickard, an executive vice president at CVS. The chain is planning to offer 90-day prescriptions in the stores, for the same price as by mail. CVS bought one of the nation's largest pharmacy benefit management units from the Eckerd chain this year.
Mr. Rickard said that filling a 90-day prescription in a store was "less profitable than filling it for 30 days three times, but more profitable than watching the business go off to mail order that you don't participate in."
Rite Aid, the third-largest drug chain, blamed the loss of auto workers' business as one of several reasons for disappointing financial results in 2004. (It said another factor was the relatively late start of the flu season.) Mary Sammons, chief executive of Rite Aid, also said in a conference call with analysts in December that Rite Aid had been considering acquiring or starting its own pharmacy benefit management unit.
My husband who owned MediRX on Coast hwy in Corona Del Mar saw the handwriting way back in 1980 when we left CA for TX.
We sold the drugstore than. Already than it was impossible for the independent to survive.
Bttt.
What goes around, comes around.
The big chain drugstores ruthlessly drove the little druggists out of business, not I will enjoy watching them suffer.
My former employer (former as of yesterday, woohoo) did this for years. In 2001 they changed our health plan to force us to use Caremark mail-order services after three refills of any prescription. Caremark required all prescriptions be for 90 days supply of medication or they wouldn't fill it.
A co-worker who was diabetic kept having problems with Caremark shipping his insulin unrefrigerated. Most other people I knew that used them didn't have a problem, though, and it certainly did keep costs down.
}:-)4
typo:
not = now
The mail order system works great for us, plus you save on the deductibles associated with the prescriptions.
I have been getting my prescriptions out of Florida for years now , it works well and its cheap. The only drugs I dont get from there are the ones I need quickly like prescriptions for colds.
Just what is needed another task which we can now outsource.
My insurance has required us to use Express Scripts for several years. Have to get 90 day supply of "maintainance" drugs. Any 3 mo. perscription is a flat $40 (I think it increased recently from #35) regardless of retail cost. My husband gets some very expensive heart meds and they only cost him $40 for 3 mo. We only go to our drug store for odds and ends and the insurance co. reimburses us a percentage of those. We are very happy with our mail order meds. The packages do rattle, but they are sealed so tight you have to use sissors to open them. You could tell if they had been tampered with. We get 3 day delivery also.
We get about 2 offers a month to buy drugs by mail but we will not be doing this unless we are forced to do it. We use an independent pharmacist and we feel a loyalty to him. He is always there to answer our questions about our prescriptions. All you have to do it walk in and ask. Much easier that waiting for a call back from the doctor.
That would be a problem. Our university health service started giving everyone forms to fill out for pills by mail, so I guess it's spreading everywhere. However, the service will not ship insulin, which I use.
While I have to admit I have no idea how the pharmacy gets its insulin (I assume by mail or UPS), I have to suppose there is some quality control. I can't count on the USPS to get the mail from one side of town to the other, why would I trust it to get insulin to me undamaged? What happens if you get a batch of heat damaged insulin? Have you used up your insurance allotment for that month? Will they send you another batch or will you have to pay out of pocket? Doesn't sound good to me at all.
I admire loyalty. Enjoy your pharmacist while you can. It sounds like the writing is on the wall for independent pharmacists as we creep towards more socialized medicine.
At least you feel some loyalty. Many people just call me up and say 'I get mail order, but can you tell me about my prescriptions, side effects and any drug interactions'. Would anyone consider calling any old doctor out of the phone book that you don't see and announce that you were somebody else's patient, but want free medical advice from them? Very rude.
I still like the choice of being able to just go to the drug store that's only a few blocks away. There's somebody to talk to if you got questions. I don't have to sit on the phone, working through an automated phone system. I think that local purchase is more convenient because I work during the daytime when deliveries are made. I have to go to the UPS or USPS office all the time to pick up my stuff because I wasn't there to receive it. Its a pain in the butt, because I have to use up my lunch hour or drive somewhere in the direction of heavy rush hour traffic to make this special trip to pick something up.
My niece and nephew live in Wilmington; you can't believe how many times I say "Go to the drugstore and tell the druggist your symptoms; he'll give you what you need."
When Drew was little, most times I'd just "show" him to the druggist and he'd tell me what I needed.....LOL.
What ever will we do without them?
My former employer - who gives me a 50% discount on all medications, no deductible and no cost - has required that I use Express Scripts for about five years, for maintenance drugs. I've had only two problems in those years. I order refills on-line and can track the progress of the prescription through the lab and shipment process. Delivery is by the US Postal Service.
Face it folks, this is the 21st century.
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