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NARD AND NACDS AGREE: DRUG MFRS. SHOULD RECONSIDER DIFFERENTIAL PRICING FOR NON-PROFITS; DRUG MFRS. WILL BE HURT BY CONSOLIDATING MARKETS, BOLGER SAYS

Executive Summary

The Natl. Assn. of Chain Drug Stores (NACDS) and the Natl. Assn. of Retail Druggists (NARD) are both urging drug mfrs. to reevaluate price policies that offer products at lower cost to non-profit institutions than to retail customers. Speaking as part of a panel of pharmacy assn. leaders at PMA's annual meeting April 16, NACDS President Robert Bolger told the manufacturing execs that the increasing number of non-profit institutions "will limit your potential markets. You cannot expect the rest of the retail Rx market to continue to make up for these lost sales and lower profits by continued product price increases. Now is the time for pharmaceutical mfrs. to reconsider their pricing practices." Bolger said that pharmaceutical mfrs. will be affected by the growth of non-profit institutions. "More and more of your sales will be made to non-profit drug purchasers who have the full capacity to adopt formularies which are based solely on economic factors," he declared. NARD President Charles West, PD, told PMA that Congress, which exempted "charitable" institutions from the Robinson-Patman Act requirements in 1938, should remove those exemptions because they have now become a form of indirect govt. competition with small businesses. "Variations in product acquisition cost, or what Congress has labeled discriminatory prices, are our single most important legislative priority," he declared. NARD "is exploring a variety of legislative options to curtail this unfair govt. interference, including changes in the tax code, the HMO Act, the FTC Act, and the 1938 Non-Profit Institutions Act," West informed PMA. "Many in Congress are expressing an interest in developing an appropriate solution." Non-Profits' Growth Into Major Drug Buyers And Dispensors Pushed NACDS And NARD Into Alliance v. Differential Pricing The retail pharmacy profession "invites" drug mfrs. "to join our campaign," West said, adding: "Pharmacy organizations and the pharmaceutical mfrs. can petition Congress to eliminate the source of such discriminatory prices. Pharmacy, industry and the public will all be winners." The growth of the non-profit institutions as major buyers and dispensers of drug products has forced NARD and NACDS into an alliance in opposition to differential pricing. Until recently, NARD's major pricing complaint was that drug mfrs. offered large retail buyers, such as NACDS members, lower prices -- based on volume purchasing -- than was available to independent pharmacists. The discussion of drug pricing practices was inresponse to a topic prepared by PMA concerning new competition and new opportunities for pharmacists. The theme for the assn.'s annual meeting was "Reaching Out to Pharmacy." To address pharmacy/mfr. issues, PMA organized the panel of pharmacy leaders which also included APhA President John Schlegel, PhD, and American Society of Hospital Pharmacists Exec. Director Joe Oddis. In the drug industry, West said that indirect govt. competition stemming from the Robinson-Patman exemptions for charitable institutions occurs when "pharmaceuticl mfrs., forced by competitive pressures to provide drugs to non-profits at extraordinarily low prices, end up shifting those manufacturing costs to the paying public . . . These discriminatory prices offered to these commercial non-profits are not based on volume purchasing or frugal business rpactices, and are not available to other commercial enterprises." Echoing West's comments, Bolger declared: "The NACDS Exec. Cmte. had identified competition from some new sources as one of the top problems facing the industry. The problem is not that there are new competitors, but that some competitiors have been given an unfair advantage through preferential prices offered by pharmaceutical mfrs. We believe that competition should be free and open, without an unfair advantage being given to one institution or another. The non-profit institutions of today "are very different from those institutions" for which differential prices were originally intended to benefit, Bolger stated. "Most ae large firms intent upon making a profit although they do not call it a profit. The only different between these firms and forprofit firms is that the profits are not distributed to the share-holders since there are none. However, profits are used for employee bonuses and for capital expansion just as they are used by for-profit firms."
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