THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, March 16, 1996 TAG: 9603160380
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY SCOTT McCASKEY, STAFF WRITER
LENGTH: Medium: 66 lines
Independently owned drug stores throughout Hampton Roads have joined a fight they say will help keep their doors open.
The pharmacies are part of a wave of drug chains and retailers nationwide that are legally aligning themselves to sue drug manufacturers for alleged price discrimination.
The legal action comes as independents nationwide say their profits have been eroded by the alleged price fixing as well as the separate issue of falling prescription reimbursements from insurance companies.
``The drug-makers are using a two-tier pricing system,'' said Boris Schwetz, owner of Arthur's Drug Store in Norfolk. ``They're selling drugs to their mail-order houses at 70 to 90 percent less than what they're charging the wholesalers or retail pharmacy groups.''
Arthur's is among several dozen local pharmacies that have joined 4,000 drug stores across the U.S. in suing the manufacturers. They are being represented by the Richmond law firm of Durrette Irvin & Bradshaw P.C.
In another lawsuit in a Chicago federal court during early February, 15 of the nation's largest drug manufacturers made a preliminary agreement to pay $409 million to more than 30,000 pharmacy owners who also alleged price fixing.
``We've done nothing wrong, but the risk of losing in court would be so high in terms of a jury award that we've tentatively agreed to settle outside of court,'' said John Doorley, executive director of corporate communications at Merck & Co. of Rahway, N.J., one of the 15 drug-makers named in the Chicago case. Merck also is a defendant in the Durrette firm's upcoming trial.
Area druggists hope the lawsuits also bring to light what they consider to be harsh practices in insurers' prescription plans. In recent years, many insurance companies have reduced the amount of reimbursements they will pay, trying to keep costs down.
``It is not uncommon for us to make a $1.50 profit on a $200 prescription,'' said Dave Halla, owner of Gray's Pharmacy in Norfolk. ``No business can survive very long on that.''
Insurance reimbursements make up a majority of most drug stores' prescription business. Druggists contend that consumer prices would be lower and reimbursement rates higher if alleged manufacturer price discrimination was ended.
Brooke Taylor, spokesperson for Richmond's Trigon Blue Cross Blue Shields's HealthKeepers program, an HMO that offers a variety of prescription insurance plans, says that the ``marketplace is very competitive.''
``The cost of prescription drugs has been increasing at a rapid rate, and Trigon is trying to keep prices down for consumers,'' Taylor said. ``We try to negotiate the best prices we can.''
Although drug retailers can refuse to accept an insurer's plan, many don't for fear of losing customers.
Pharmacists insist that the outcome of the upcoming trial and future prescription policies of insurance companies will play a vital part in whether drug stores as we know them today will survive.
``If these practices aren't stopped, full-service pharmacies will no longer be able to provide things like delivery, specialty drug items, and house accounts,'' Schwetz said. ``They'll be a thing of the past.''
KEYWORDS: LAWSUIT PHARMACIES by CNB