Mail orders no friend to pharmacies

Tuesday, May 31, 2005

BALTIMORE, Md. -- Marty Mintz, owner of Northern Pharmacy and Medical Equipment, is feeling the pressure as more of his patients switch to mail order prescriptions. Now he, and many pharmacies like him, are looking to DME to bring more people through the door.
Some health plans and employers are requiring patients to order their maintenance medications through mail order pharmacies. The practices leading to this shift have come to the spotlight on a national level -- in the media and the courts -- with questions swarming about whether the tactics of pharmacy benefit managers (PBM) are fair.
According to John Rector, an attorney with the National Community Pharmacy Association (NCPA), PBMs, like Medco Health Solutions and Express Scripts, two of the country's largest PBMs, are pressuring employers and health plans to require that maintenance medications be ordered through mail order companies, many of which are owned by the PBMs.
"What the PBMs have done is make it financially unattractive to go to the local pharmacy," he said. "There's a greater co-pay or there is a co-pay for the pharmacy and not for the mail order, or they put a deductible on the coverage if you go to the pharmacy. So they create a lot of disadvantages short of mandating where you have to go."
Pharmacies are trying to mitigate the problem by moving into DME.
"You have to go after new business," said Mintz. "We have a large selection of medical equipment and in order to get to the pharmacy you have to walk through the DME department, which is a couple thousand square feet. Then, the customer might say, 'Hey, my dad could use this lift chair or this walker,' so it certainly helps with sales."
Mintz says going after manage care contracts is also beneficial, if you can afford the man power it takes to do it right.
"It's just a matter of biting the bullet," said Angelo Voxakis, president and CEO of Epic Pharmacies, a 500-member pharmacy buying group covering 10 states and Washington D.C. "There are stores closing down because of this. One of members just closed down. He said mail order killed him, and it's happening more and more."
A Wall Street Journal article from February ("Generic Drugs by Mail can be a Raw Deal") shed light on this problem. It talked about how PBMs and mail order companies are securing huge profits by negotiating contracts with health plans and drug manufacturers. Court battles in some states, including Maine, are try to ensure that mail orders meet the same standards as independent pharmacies.
"All we are asking for is an even playing field," said Voxakis. "Mail orders can go and negotiate a 20-25% discount with a drug manufacturers and say 'This is the drug we are using for this therapeutic class.' Retail, we can't do that. We have to carry everything, so that's an unfair financial advantage."
This means mail order companies are seeing pre-tax profits between 40 and 50%. "My gross profit is 16%," said Voxakis.
Despite losing business, pharmacy owners say their services are still in demand. Voxakis says he fills five to 10 prescriptions per week for people who have not gotten their mail order in time.
"People also come in with questions about their mail order prescriptions," he said. "They ask, 'Doc, this is a different color, what is it' or 'I'm confused about this' or 'what are the side effects.' We are giving our free information."
Another disadvantage, said Rector, is that PBMs and mail orders are not regulated by the states. The NCPA is trying to promote legislation that would require mail orders be licensed or at least have to disclose their licensing status to patients.
If a patients had a fair choice between filling a prescription at a pharmacy or sending it mail order, trust me, 90% of the time they will go to a pharmacy," said Voxakis. "That's what I tell legislators: If it's an even playing field, I'll win."