Walgreen won't honor drug plans with mail-order requirement

No. 1 drug chain gets tough with a growing rival

December 05, 2003|By Bruce Japsen | Bruce Japsen,CHICAGO TRIBUNE

In an escalation of the war between traditional drugstores and mail order prescription companies, the nation's largest pharmacy chain said yesterday that it will not do business with new insurance plans that require patients to order drugs by mail.

The decision by Walgreen Co. doesn't affect consumers covered by prescription plans that currently have deals with the company, but its move has repercussions for Walgreen's future contracts.

It's also a pre-emptive strike against the possible side effects of the new Medicare drug bill passed last month by Congress and awaiting President Bush's signature.

Under the proposed Medicare drug benefit, private pharmacy management companies - which encourage and increasingly require patients to order their maintenance drugs by mail - will be a key option for seniors seeking drug coverage.

Walgreen, as well as other drugstore chains, dislikes order-by-mail plans because they keep patients from taking trips through the doors of one of its 4,291 U.S. stores, where consumers also might buy other items. Only 5 percent of Walgreen's business is done with insurance providers that require mail order for certain prescriptions.

More significantly, mail-order prescriptions have been growing steadily - up 17 percent in the past five years - and have begun eating into the retail pharmacy business. In the United States, about 5.5 percent of prescriptions were filled by mail through October, according to the latest pharmacy data from health information firm IMS Health.

Orders at chain stores have dropped slightly or hovered around 52 percent of the total market during the same period, IMS data show. Even so, the number of mail prescriptions - 157 million - is still a small portion of the roughly 3 billion prescriptions filled each year.

At Walgreen, the pharmacy accounts for more than 60 percent of its revenue - making it a business the company cannot afford to lose.

Walgreen also claims that mail ordering maintenance drugs denies patients, particularly the elderly, the opportunity to consult with a pharmacist who can educate them about medication interactions or other health issues.

"The people who most want that relationship with their community pharmacy and the ones who need that extra consultation most are the seniors," said Walgreen's spokesman Michael Polzin. "They are the ones who take most of the [maintenance] medications and who are more likely to find mail service confusing."

Millions of Americans take maintenance medications for chronic conditions such as high cholesterol, high blood pressure or heartburn.

A growing number of health plans and drug benefit companies allow patients to fill only their first prescription at the pharmacy, and then require them to order 90-day supplies through a mail-order pharmacy. If the patient chooses to refill at the conventional pharmacy, the insurance company won't provide coverage.

Pharmacy benefit managers work as middlemen between drug makers and employers, steering a lot of prescription business to mail-order pharmacies.

Benefit managers buy drugs in bulk and negotiate deals with drug makers in hopes of saving employers money on medicines for their workers. The managers also encourage patients to order drugs via the mail.

As employers and government health insurance programs increasingly turn to pharmacy benefit managers to save money on rising pharmaceutical bills, drugstore owners often have found themselves at odds with the industry.

The pharmacy benefit manager industry believes Walgreen is taking a risky step that could hurt its bottom line.

"Do employers make their employees pay more in terms of cost-sharing for drug benefits or do they cut Walgreen out of their network?" asked Mark Merritt, president and chief executive of the Pharmaceutical Care Management Association, the Washington trade group representing the industry. "It's really employers who are going to call the shots."

Pharmacy benefit managers also disagree with Walgreen's allegation that they don't provide consumers with personal contact with pharmacists. The managers typically have pharmacists available around-the-clock by toll-free number.

"Mail order or home delivery is simply an option, and consumers love it, and it saves them a ton of money," Merritt said. "There are a lot of shut-ins who can't get to the retail counter. Home delivery is important for America's most vulnerable."

The Chicago Tribune is a Tribune Publishing newspaper.

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