Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, May 28, 1994 TAG: 9405310119
SECTION: EDITORIAL PAGE: A-9 EDITION: METRO
SOURCE: By GEORGE MAUNEY
DATELINE: LENGTH: Medium
Retail pharmacies, both chain and independent, could dispense prescriptions for free, and still the real savings realized by the health system would be insignificant when compared to overall drug cost.
Herein lies most of the retail pharmacy's problems. It's a double-edged sword. On one side, pharmacies face major manufacturers, and on the other side are the payers (insurance companies).
Major manufacturers have been responsible for almost all pharmaceutical price increases that consumers have experienced over the past 20 years. They've continued to operate at a level of net profit in the 15 percent to 20 percent range during this time.
The prescription-market arenas are subdivided by drug manufacturers into six main categories: Government (veterans and state hospitals), hospitals, HMOs (owned by insurance companies and considered to be nonprofit entities by manufacturers), mail-order, chain and independent pharmacies. These six categories are considered different classes of trade by drug manufacturers and, therefore, receive different discounts. This is why you can purchase prescriptions cheaper through the mail. It isn't because HMOs and mail-order houses can dispense prescriptions cheaper; it's because they're allowed to purchase drugs cheaper - a lot cheaper. And, these purchases aren't always based on volume.
Several years ago, a large number of independent and chain pharmacies formed buying co-ops (some with upward to 500 to 1,000 members). Guess what? Major brand-drug manufacturers wouldn't even consider their request for discounts. They were considered a ``different class of trade.'' This is one problem President Clinton's proposal is trying to deal with, and manufacturers don't like it. Why? They stand to lose money. As it stands now, the American consumer, by purchasing prescriptions at the retail level, pays the highest prices for drugs in the universe!
The other side of the sword involves payers. As middle men (or paper pushers), they say they can achieve a lot of savings on drug bills. I'm sure they have and can. They raise premiums and reduce providers' (pharmacies) fees. When finding they can no longer profit in this manner, they let pharmacies dispense prescriptions for free (necessitating the offsetting of any losses by price increases to the cash-paying patient). Finally, they seek to restrict providers by setting up closed networks. If you can't get in the game, you can't play. Insurance companies are beginning to put the squeeze on manufacturers by asking for rebates. Insisting pharmacies use preferred products by a certain manufacturer in return for rebates sounds like a good idea. However, is the consumer receiving that rebate in the form of a reduced co-payment or premium? Or is the insurance company reaping the financial benefit?
``Managed competition,'' referred to in your editorial, works fine if providers are allowed some room for profit and growth. However, look at what's beginning to happen to pharmacy services in Montgomery County and Radford. Due to recent mergers and acquisitions, Revco now dominates this area with 10 or 11 stores. What are insurance companies and consumers going to do in several years when new contracts mailed out come back from Revco unaccepted? This will be a corporate decision and not, I can assure you, one made with Southwest Virginia's best interests at heart. So, then you, a family member or neighbor may have to drive 40 miles or more to purchase prescriptions. When you factor in losses in revenues to your town due to reduced sales, property taxes will rise to cover the town's operating expenses. Have we really saved anything here?
My point is this: Major manufacturers need to do away with tier pricing so all providers purchase at the same price. Given that everyone will be reimbursed at an equitable fee by payers, this would then allow for plenty of local support for all local pharmacies (be they chain or independent). Insurance companies or single payers (whichever plan the government finalizes) would still be free to negotiate with manufacturers for rebates based on one large volume, and local pharmacies would still survive and be able to provide pharmaceutical services at the level where it will be most needed - in local neighborhoods and towns, not from some distant city, out of state or out of the country.
Seventeen other states already have a consumer-choice law for pharmacies on their books. House Bill 840, recently signed by Gov. George Allen, will guarantee the right to equal access for all Virginians to the pharmacy of their choice for pharmaceutical services and medication.
George Mauney of Blacksburg is a pharmacist and co-owner of a pharmacy in Pembroke.
by CNB