The impact mail order has had on community pharmacy over the past decade is profound. And the rapid rise of mandatory mail plans, which penalize members with higher co-pays if they choose to get their chronic-care prescriptions from their local neighborhood pharmacist, has made the situation that much worse.
Large numbers of employees and their dependents now fall under mandatory mail plans, including employees of such big companies as IBM, DuPont and General Motors, as well as members of such unions as the United Auto Workers.
According to the 2007 Pharmacy Satisfaction Digest from WilsonRx and Boehringer Ingelheim, approximately 1-out-of-3 households indicate that they use a mail-order pharmacy to fill or refill prescriptions at least some of the time, and 36 percent of those households say they’re required to do so by their health plans.
The result has been a significant long-term shift of prescription business away from community pharmacy and into giant mail-order operations, many of them owned by the very prescription benefit management companies that chain and independent pharmacies depend on for the vast majority of their pharmacy customers. Although retail pharmacy leaders have long complained about the potential conflicts of interest and monopoly that PBM-owned mail-order pharmacies represent, the managed care industry has reaped a sales and profit bonanza by shifting millions of patients into its own mail divisions—and by convincing large employers and other health plan sponsors to impose mandatory mail provisions on their own beneficiaries.
For retail pharmacy, however, the picture isn’t all bleak. While the mail-order pharmacy business continues to grow, that rate of growth appears to be leveling off. Prescriptions by post grew at a lower rate of 10.7 percent in revenue in 2006, according to IMS Health, to $42.3 billion, or 21.5 percent of total U.S. retail prescription sales. Sales in units, or numbers of prescriptions actually dispensed by mail-order pharmacies, rose just 4.2 percent last year, for the second year in a row.
As a percent of all retail U.S. scripts dispensed, mail accounted for just 6.8 percent of total prescription units in 2006.
By contrast, script counts jumped 13.2 percent at mail-order pharmacies in 2004, according to IMS, with dollar volumes up 17.9 percent. The following year, that growth rate already was showing serious signs of a slowdown, with script revenues up 11.5 percent for mail-order pharmacies in 2005, and units dispensed growing at 4.2 percent.
The latest data underscore the slowing growth trend. “For the first time in several years, script growth at chains [including mass] rose at a faster pace than at mail, with a 5.8 percent increase [in 2006] vs. the 4.2 percent growth in mail scripts,” noted retail analyst Meredith Adler of Lehman Brothers Equity Research. “The growth in scripts for all retailers was only 4.3 percent, with independents’ growth of 1.9 percent dragging down the retail average, but even then retail growth was about the same as mail growth.”
It could be that mail-order is nearing full capacity as an alternative form of prescription delivery—particularly with the advent of 90-day prescription programs by many pharmacy chains and growing acceptance of 90-day retail programs by third-party health plans and states. Meanwhile, pharmacy leaders are lobbying intensively for legislative changes to the Medicaid program that would allow retailers to match the 90-day script benefits offered by mail-order plans to Medicaid patients.
Chain and independent pharmacy stakeholders did score one significant victory in recent months on the mail-order front. A massive grassroots lobbying campaign by retail pharmacies and their supporters persuaded members of the U.S. House of Representatives to keep a mandatory-mail provision out of the new appropriations measure for the Tricare military health program and its 9.2 million beneficiaries. The provision was contained in the massive Fiscal Year 2008 National Defense Authorization Act, although the measure has yet to win final approval in the Senate and the signature of the president.
“This bill is pro-soldier and pro-veteran in that it protects the right of Tricare beneficiaries to benefit from their relationships with community pharmacy, which improve patient outcomes. The bill also is pro-savings for military families and for the Department of Defense,” said National Association of Chain Drug Stores president and chief executive officer Steven Anderson.
“In a partnership with the National Community Pharmacists Association, representing the independents, we directed over 100,000 letters, faxes and phones calls to legislative offices,” noted former NACDS chairman Tony Civello, who is president and chief executive of Kerr Drug, in a speech earlier this year. “Using our enormous combined energies—and reaching deep into our local grassroots—we conducted a successful strategic campaign. And the result was a win, not only for retail pharmacy, but for all the people served by Tricare who might have been denied the right to get their medications from their community pharmacy.”