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NACDS NEW CHAIRMAN EILS PROMISES GRASS ROOTS MOBILIZATION ON COST CONTAINMENT, THIRD PARTY AND MULTI-TIER PRICING AND PHARMACIST EDUCATION ISSUES

Executive Summary

The National Association of Chain Drug Stores' incoming chairman, Richard Eils (Thrifty Corp.) pledged to lead a "grass roots mobilization" to confront three key issues contributing to the erosion of the retail chain drug store industry's profit margins during his inaugural address at the NACDS annual meeting April 21-25 in Palm Beach, Florida. Eils called for a proactive stance from the association, saying: "We must now aggressively take our case to payors and to state houses across the country." Eils said NACDS must "mobilize our considerable forces this year. We must use NACDS as a nerve center that can communicate, coordinate and mobilize, that can deliver our message loud and clear to every congressman and senator, to every governor and elected official." He recommended that NACDS focus its efforts during his 1990-91 chairmanship on three "critical" free-market issues "confronting us in the 90s -- cost containment, multi-tier pricing and the cost of supplying skilled employees in our workplace." On the issue of third party reimbursement, Eils challenged "all of pharmacy -- retail, wholesale and manufacturers" -- to "share" in the cost containment challenge posed by the growth of third party payors. "Today," he charged, "the burden and pressure has been focused excessively on retail community practice" to keep rising costs under control. Possibly alluding to the Merck "best price" Medicaid rebate program proposed April 19 ("The Pink Sheet" April 23, p. 3 and related T&Gs in this issue), Eils said that "pharmaceutical manufacturers must recognize that they will also have to begin to play a legitimate role in the immediate cost-containment environment." If pharmaceutical manufacturers do not do their part, he warned, "the pharmaceutical industry as a whole will risk significant division." Eils promised to fight multi-tier pricing. He contended that the growth of HMOs, mail-order pharmacies and physician dispensing has led to retail chain drug stores' unequal access to favorable drug pricing. "We cannot compete effectively when our competitors are afforded more favorable treatment, even," he remarked, "if this treatment is wrapped in so-called different classes of trade." Community pharmacy, Eils said, "must, and we will, fight to assure fair competition in the marketplace." Also putting the squeeze on profit margins, he noted, are the accelerating costs of doing business; since 1983, the cost of the industry's goods has risen 10% per year while the cost of meeting salaries and payrolls has risen 12% per year. Inflation has combined with the difficulties in hiring, retaining and adequately paying skilled employees to affect profitability negatively, Eils said. In particular, he cited the decreasing pool of pharmacists and the negative effect NACDS foresees from efforts to make a six-year PharmD degree mandatory. President of the California-based Thrifty chain of more than 1,000 stores, Eils called his state an example "for the rest of the country when a six-year PharmD is the only degree offered: fewer drug stores, fewer pharmacists, and fewer drug store hours." Outgoing Chairman Gerald Heller (May's Drug Stores), also called cost containment the most critical issue facing the retail chain drug store industry today and suggested that helping the pharmacist to spend more time with customers may be part of the solution. Responding to a question during an April 25 panel discussion on "challenges facing retails in the 1990s," Heller said that as profitability deteriorates, "we must find a way to utilize new technologies and to work to be certain we can fill a large number of prescriptions the most efficient way." He suggested that help could come "maybe through pharmacy technicians [or] robotics." Elaborating on that theme, Walgreen's Fred Canning agreed that pharmacy technicians or "parapharmacists" would provide some relief to the pharmacist. One way to get states to approve of the technician idea, he suggested, would be to require parapharmacists to have one year of college and additional training under a pharmacist's supervision. NACDS President and CEO Ron Ziegler also emphasized that cost containment is the association's core concern. The defunct Catastrophic health care bill, Ziegler said, "confirmed pharmacy as a key element in the delivery of health care services." As the debate on containing health care costs grows, he said that the profession should build on that publicity and "emphasize the fact that the American drug store cannot continue to absorb an excessive proportion of the cost containment pressure of government and private third-party programs.
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