Drugstores in Pennsylvania fight rise of mail-order pharmacies

Posted: October 31, 2011

In the last four years, Jim Reginelli, an independent pharmacist, has watched the number of prescriptions his stores fill drop by 30 percent.

He chose his profession after developing a close relationship with his neighborhood pharmacist as a boy while picking up prescriptions for his father, who had multiple myeloma. Now 45, Reginelli wants to give that kind of personal service to customers at his four stores, the best known of which is Nisenholtz Pharmacy in the Northeast.

He thinks a relationship with a pharmacist increases the odds that patients will take their medications correctly and avoid dangerous interactions. He also thinks the realities of modern drug purchasing unfairly jeopardize that relationship.

He blames mail-order pharmacies - more accurately, insurance companies that force or strongly encourage subscribers to use mail-order - for eroding his profits.

"I'm treading water," he said. "It's tougher and tougher."

Reginelli and other independent pharmacists are stepping up efforts this month to pass bills in the Pennsylvania Senate and House - H.B. 511 and S.B. 201 - that would, in their words, "level the playing field." The bills, sponsored by local Republicans, were reintroduced after stalling in the last session. They would ban financial incentives such as lower copayments that channel subscribers to mail-order drugs as well as insurance rules requiring customers to use mail-order. Local pharmacists would get the chance to accept the same terms.

The bills also would require pharmacy benefit managers - companies that set the terms of insurance drug-coverage programs - to disclose payments from drugmakers for inclusion in formularies. Requiring those companies to take those payments into account could lead to higher reimbursement levels for brick-and-mortar pharmacies.

The House version of the bill has advanced to the Appropriations Committee; the Senate version is still in the Banking and Insurance Committee. Sean Moll, legislative assistant to Sen. John Rafferty, the bill's chief sponsor, said it was too early to tell how the bill would fare in this session. In the last session, it died in Appropriations. Gary Miller, a spokesman for Gov. Corbett, said that the administration was not inclined to support the bills in their current form, but that it valued community pharmacies and was open to discussion.

Insurance companies usually require subscribers to use mail-order pharmacies for medications for chronic conditions such as diabetes or high blood pressure. Many plans allow subscribers to renew prescriptions at a local store, but they must do so each month and pay a copay every time; they can get a 90-day supply in the mail for only two copays. After members have used a medication for a couple of months, some plans will pay only for refills ordered by mail.

PARD, an association of independent pharmacies in Pennsylvania, launched a $70,000 public-awareness campaign about the state bills last month that included radio ads in Philadelphia. Participating pharmacies give customers fliers that tout the legislation. "I want prescriptions from my local pharmacist, not a stranger," the fliers say.

The primary argument for mail-order pharmacies is that they use their larger size to negotiate lower prices for drugs than individual pharmacies can. Insurers try to direct consumers to the cheapest alternative. Community pharmacists argue that the largest pharmacy benefit managers also own mail-order pharmacies - proponents call them "mail-service" pharmacies - giving the pharmacy benefit managers a strong incentive to push the mail option.

Legislation similar to that under debate in Pennsylvania has passed in New York, but has not yet gone to the governor for his signature. In an advisory opinion last summer, the Federal Trade Commission said the bill could raise prices. Mississippi passed legislation that increases state regulation of pharmacy benefit managers, and other states have added rules on how pharmacy benefit managers can audit local pharmacies.

Medicare earlier this month proposed rules that would require pharmacy benefit managers to disclose more information about their financial relationships with mail-order pharmacies and drug makers.

In 2005, the Rendell administration opposed an earlier attempt to rein in mail-order after the Pennsylvania Employee Benefit Trust Fund said banning incentives to use mail pharmacies could cost $47.4 million a year. The state Insurance Department says it has concerns about the cost of the bills but it hasn't taken a position.

Legislative help is crucial, said PARD's interim executive director, Barry Jacobs, because prescription drugs account for 90 percent of revenue in the typical independent pharmacy. He says mail-order had taken off in the last five years, cutting prescription volume by 25 percent for pharmacies he represents.

Presenting the usual dueling numbers and studies, supporters and detractors of mail pharmacies argue about cost, competition, service, quality, and safety.

The community pharmacists say their relationships with customers improve people's health, thus reducing expensive medical crises. They also say that the 90-day prescriptions encouraged by mail-order lead to waste because many people change medications or pharmacies automatically refill unwanted prescriptions. Also, drugs may deteriorate while sitting in mailboxes during extremely hot or cold weather.

They also say drugstores are more price competitive with mail-order houses than insurers have led employers to believe. They say the rules that pharmacy benefits managers set benefit their own subsidiaries - the mail-order pharmacies - while making it impossible for independent druggists to compete.

Supporters of mail-order pharmacies say they are cheaper for the same reason that Wal-Mart and Amazon are cheaper than their mom-and-pop competitors. Many people don't fill prescriptions because of the cost, so lower prices mean more people take the medicines their doctors ordered. For people who live in rural areas or who can't drive, mail can be more convenient.

Michael Cohen, president of the Institute for Safe Medication Practices, said he was impressed with safety features in mail-order pharmacies that leave "virtually no chance for error." Cohen, who contributes to The Inquirer's "Check Up" blog, still sees high value in a face-to-face relationship with a community pharmacist.

"When all is said and done," he said, "we do believe pricing should be the same and consumers should be given a choice without incentivizing one way or the other."

Dan Hussar, a professor of pharmacy at the University of the Sciences' Philadelphia College of Pharmacy and a supporter of the proposed bills, said proponents of the bill had asked repeatedly for proof that mail-order pharmacies save money but had been rebuffed.

Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, a trade group for pharmacy benefits managers, said mail-order typically saves consumers and their employers - the true purchasers of medical care for most working adults - about 10 percent. He said the business was very competitive, so pharmacy benefits managers couldn't afford to exaggerate savings at the mail-order pharmacies they own.

"The big employers wouldn't use mail-service pharmacy if it didn't save them money," he said. "Our industry wants employers, who are our clients, to have whatever choice they want."

Adam Fein, a Philadelphia expert on pharmaceutical economics, said mail-order market share had been declining as big chain pharmacies had become more competitive. Despite independent pharmacies' complaints, there are as many of them today as a decade ago.

A typical mail-order pharmacy dispenses as many drugs as 600 community pharmacies, he said. That gives mail-order advantages in buying power, logistics, purchasing, and automated dispensing. "It's just fundamentally cheaper," he said.

He said employers had a vested interest in keeping drug bills down. Requiring employees to use particular pharmacies is no different than creating networks of cheaper doctors or labs, he said.

He sees it as anticompetitive to protect community pharmacies. "The job of competition," he said, "is not to protect a certain kind of competitor."


Contact staff writer Stacey Burling at 215-854-4944 or sburling@phillynews.com.

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