WHAT IT MEANS AND WHY IT'S IMPORTANT — Retail pharmacy has long fought for a level playing field when competing with mail order, and that's what N.Y. Gov. Andrew Cuomo handed them last week. No longer will patients be funneled into filling their prescriptions at the mail order pharmacy. And no longer will insurance companies be able to exempt patients from making the same co-payment as they do at retail. At least not in New York. There the market will finally be able to decide if patients want the no-frills rock-bottom prescription pricing they get from mail order or the personality of a pharmacist and the convenience of an easy-in, easy-out store front with that same rock-bottom pricing.
(THE NEWS: Reports: N.Y. Gov. Cuomo signs controversial mail-order pharmacy bill. For the full story, click here.)
Many would assume, so long as the prescription pricing is the same, that the personalized service a pharmacist can provide along with many other conveniences — 24-hour storefronts, drive-through pharmacies, mascara and cold medicine under the same roof — would become the prescription-filler of choice for all but maybe a smattering of shut-ins. That was certainly the sensing the week before the N.Y. bill was signed at a U.S. Senate hearing to discuss the proposed Express Scripts/Medco merger. Representing the National Community Pharmacists Association, pharmacist Susan Sutter threw down this gauntlet: "I would challenge [the PBMs that] if [mail order or pharmacy were] made it absolutely equal," then community pharmacy would win out.
And Cuomo, unfortunately, has made it absolutely equal with the stipulation that “a retail pharmacy must agree in advance to accept the same reimbursement rate and applicable terms and conditions established for mail-order pharmacies.” The problem there is mail-order pharmacy does not have nearly the overhead costs that retail pharmacy does. Acquisition costs are lower; supply chain and warehousing expenses are conceivably less; and there's certainly a lot less capital expenditures and payroll expenditures to manage versus, say, a national chain.
What's more, mail order fills 90-day prescriptions, a factor that would take two sure-fire trip occasions out of play for retail pharmacy.
So how will this all play out? Will the absolute volume of patients migrating from mail order to their local New York pharmacies, and the increased total marketbasket those consumers represent over the long-term, make up for what is expected to be the even-slimmer margins retailers will recuperate in serving these customers? And will any mass exodus from mail order to retail upset the prescription drug acquisition dynamics decidedly in favor of pharmacy? Asked another way, if you had a choice between an IMAX theater experience versus a sticky-floor two-screen cinema experience for the same $10, where would you buy your popcorn?