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Publix joins national retail crime database program

BY Drew Buono

WASHINGTON Publix has joined the Law Enforcement Retail Partnership Network, a national crime database designed to unite law enforcement agencies and retailers in the fight against organized retail crime.

Retailers can share information with each other and law enforcement via the database. Other retailers associated with this program include: Walgreens, Target, Supervalu and Vitamin Shoppe.

Companies will have exclusive access to the LERPnet, which will offer all information that other retailers post on it. Using LERPnet, retailers A, B and C will be able to enter each incident separately into the system and allow other users to communicate with other companies and law enforcement about crimes occurring in their stores.

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Kings of the coasts make waves

BY DSN STAFF

WALNUT CREEK, Calif. —A strong showing from RX America drove Longs Drugs to another profitable quarter, with earnings jumping 45 percent to $19.3 million. And Longs executives said they expect 2008 to be an even better year for its fast-growing pharmacy benefit management division.

Longs reported a 3.3 percent increase in revenue for the third quarter ended Oct. 25 with $1.24 billion in sales. Same-store sales jumped 1.4 percent, with pharmacy sales increasing 2 percent and front-end sales edging up 0.8 percent. The chain also opened or relocated 13 stores during the quarter to push its count to 29 for the first nine months of the year.

“We’re improving the profitability of our retail segment and better aligning our stores with our longer-term goals while we continue to pursue new business opportunities at RX America,” said Longs chief executive officer Warren Bryant. For the first nine months of its current fiscal year, Longs posted $61 million in net income.

RX America generated $79.7 million, a 6.3 percent increase over the same quarter last year. But the real growth came from its PBM business, with revenues jumping 96 percent to $19.1 million compared with just $9.7 million in the same quarter last year. Prescription drug plans produced $60.7 million in revenues, down from $65.3 million last year.

Bryant said the jump in PBM revenues was a result of new resources Longs poured into it to grow the business for the remainder of 2007 and into 2008. “Earlier this year, we put an infrastructure in place to grow our PBM,” Bryant said. “We brought in some new sales people, and we believe we’re seeing the early results of those efforts.”

Bryant said RX America is also “gaining a national reputation” as a good service provider, something that’s attracting larger employers to its PBM and could produce big growth in 2008 and 2009.

In a Nov. 15 report, Lehman Brothers analyst Meredith Adler noted that “RX America is just starting to prove itself in the larger employer market and is optimistic that its success will lead to more of that business,” something she said “bodes well for fiscal 2008 and fiscal 2009 profits.”

On the PDP side of the business, Longs said it expects to add as many as 140,000 members to its base next year as a result of competitive bids it submitted to the Centers for Medicaid and Medicare. “We see the potential to have 360,000 to 380,000 members next year compared with 240,000 this year,” Bryant said.

At the store level, Longs continues to post improved results as it remodels more stores and sees front-end sales posting modest but positive gains. Bryant said 48 percent of Longs’ store base has been remodeled to date, and 40 stores are scheduled for remodels next year along with 20 to 30 new openings or relocations.

The chain also is adding drive-through windows at new and relocated stores whenever it can and now has windows at 48 of its 508 stores. And the new stores that opened this year are smaller and average about 12,000 square feet compared with 16,000 square feet at older stores.

Longs also encountered new competition in Hawaii when Walgreens opened its first store there on Nov. 1, with plans to add three more stores in 2008. Longs executives have declined to comment on Walgreens debut in the market.

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Waging an all-fronts battle to halt Medicaid AMP plan

BY Jim Frederick

ALEXANDRIA, Va. —Call it a marriage born of necessity.

The two national organizations representing chain and independent pharmacy have once again joined forces—this time in a high-stakes, last-ditch legal effort to block the imposition of a new and potentially devastating round of cuts in Medicaid prescription reimbursements for generic drugs.

Those cuts are due to take effect Jan. 30, 2008, when the Centers for Medicare & Medicaid Services begins imposing a new payment policy for pharmacies dispensing generics to Medicaid patients. That new reimbursement formula—based on the average manufacturer’s price of the generic drug, plus a dispensing fee—will force pharmacies to dispense prescriptions at a loss and could lead to the disruption of service to Medicaid patients and even to the closing of many pharmacies, industry leaders assert.

The government’s new payment program also includes a plan to publish the AMP-based prices of generics on the Internet.

In response, the National Association of Chain Drug Stores and the National Community Pharmacists Association are waging a multi-pronged legal, lobbying and public relations campaign under the umbrella group known as the Coalition for Community Pharmacy Action. The goal: to turn aside the new White House payment plan before it goes into effect and convince Congress to adopt legislation that would force CMS to change the new rule.

The centerpiece of their efforts is a lawsuit, filed last month in the United States District Court for the District of Columbia against the U.S. Department of Health and Human Services and CMS. The suit, which also names HHS Secretary Michael Leavitt and CMS Acting Administrator Kerry Weems, seeks to overturn the new reimbursement rule as a violation of laws governing Medicaid payments under the Social Security Act.

“The AMP rule does not comply with the Social Security Act’s definition of AMP,” which “defines AMP as the prices paid to manufacturers by wholesalers for drugs distributed to retail pharmacies,” noted a statement from NACDS and NCPA. “The AMP rule includes many transactions that have nothing to do with either the prices paid by wholesalers or drugs distributed to retail pharmacies.”

The coalition also is asking the court to halt the plan by CMS to publish the “flawed” generic drug prices on a public Web site.

“We’re asking the court to halt both the AMP Web site and the reimbursement cuts that are going to be implemented pursuant to this rule,” NACDS president and chief executive officer Steve Anderson explained in a conference call with reporters.

“The cuts to Medicaid pharmacy reimbursement rates which CMS wants to implement in January would force community pharmacies to sell Medicaid-reimbursed generic medicines at one-third below acquisition cost,” said Anderson and NCPA executive vice president and CEO Bruce Roberts in a joint statement. “Our members cannot do that and be able to purchase, stock and dispense drugs in the low-income communities where Medicaid sales are a large percentage of the business.

“If unaddressed, small and independent pharmacies will be forced to close their doors or to drop out of Medicaid and further threaten low-income Americans’ access to quality health care,” they added.

Soon after filing its original motion, the coalition went back to the court to seek an expedited review of the suit. NACDS general counsel Don Bell said the pharmacy groups also are asking for a preliminary injunction to halt implementation of the new rule.

Anderson and Roberts cited the need for urgency. “In less than three months, the pending rule put forth by CMS will go into effect, resulting in drastic reimbursement cuts for retail pharmacies,” they noted. “The injunction seeks to obtain an expedited review of the lawsuit given the short time frame pharmacies are facing.

“We cannot stress enough the importance of a remedy that will allow low-income patients to have access to their medications,” the two industry group leaders added.

In line with the 11th-hour legal action, Anderson and Roberts also held an audio press conference to announce what they called “redoubled advocacy for a legislative remedy this year, to fix this problem.

“We are pursuing this two-pronged approach, and while we are hopeful to have a success in court, it is imperative to encourage Congress to work with community pharmacy to find more appropriate, cost-based models for reimbursement under Medicaid,” they announced.

In line with that approach, the leaders of the two pharmacy groups sent a letter Nov. 7 to members of the Senate Finance Committee and the House Energy and Commerce Committee, as well as the co-sponsors of legislation to address the AMP payment issue. “This lawsuit was necessary at this time given the impending crisis on January 2008, but legislative action this year remains necessary to sufficiently remedy this problem,” Anderson and Roberts told lawmakers. “Action by Congress is the only long-term solution.”

The coalition also has launched a new ad campaign aimed at congressional lawmakers, painting a stark picture of the potential damage the new AMP regulations could have for community pharmacies and urging them to support the Fair Medicaid Drug Payment Act in the House and Senate, and the Saving Our Community Pharmacies Act in the House.

During their conference call with reporters, Anderson, Roberts and other leaders of both pharmacy organizations spoke urgently about the need to halt CMS’ payment plan, and about a longer-term legislative solution in Congress.

“This really has galvanized the pharmacy industry,” Anderson said.

His counterpart at NCPA agreed. “This is an issue that really has galvanized the pharmacy industry to work together,” Roberts said. “It is troubling what’s coming down the pike for pharmacy, and so unacceptable. We cannot let this stand; we’ve got to do everything we can to turn it around. If this goes forward…it will put a lot of pharmacies out of business, and ultimately access for these Medicaid beneficiaries will be jeopardized.”

NACDS general counsel Bell, another conference-call participant, said chain and independent pharmacy groups “are absolutely not alone” in voicing alarm over the pending cuts. “The PBMs, the wholesalers and many other groups submitted comments to CMS regarding these rules, which were very much in line with the comments we filed…and with the arguments we made in our lawsuit,” Bell told reporters.

With generics accounting for 50 percent to 60 percent of the drugs dispensed in U.S. pharmacies to Medicaid patients, the cost of the new payment formula to many pharmacies could be draconian, indicated Mary Ann Wagner, NACDS senior vice president of policy and pharmacy regulatory affairs.

“This will cost pharmacies $8.4 billion in just the first five years,” said John Rector, NCPA’s chief legal counsel.

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