MAIL ORDER PHARMACY DOLLAR SALES GREW 52% IN ONE YEAR
MAIL ORDER PHARMACY DOLLAR SALES GREW 52% IN ONE YEAR, from calendar 1987 to 1988, according to a recently issued Health Care Financing Administration study conducted by Brandeis University and the University of Maryland. The increase is a weighted average of data from nine firms gathered through detailed questionnaires and site visits, with greater weight given to larger mail service firms. Sales in dollars rose by 46% for larger pharmacies participating in the study (those with more than 1 mil. prescriptions filled in calendar 1988) to an average of $205 mil. By comparison, smaller firms experienced a 178% average revenue growth, to $13.2 mil. in 1988. The study, originally requested under the defunct Medicare Catastrophic Care Act, underscores the number of recent entrants into the mail order field. The report is entitled: "Study to Evaluate the Use of Mail Service Pharmacies." Principal researchers were Constance Horgan, Brandeis University, and David Knapp, University of Maryland Center on Drugs and Public Policy. Of 34 pharmacies initially considered for the survey, more than half had been in the mail order business for less than five years, and three began business within the year preceding the study. For the nine firms participating in the survey, the researchers estimated that gross margins averaged 20%, about one percentage point higher for large firms and one point less for small firms. Average price per prescription in 1988 was $42.32 for a 77-day supply. Orders averaged 2.2 prescriptions with a total price of $95.61. The researchers found that the mail order pharmacies filled about 25% of prescriptions with generic products, compared with the 13% for community pharmacies reported in research literature. Many of the surveyed firms indicated that they chose their location in part to be in a state with more liberal generic fill laws. Mail businesses also turned over their inventory more often, 14 times a year versus five times a year reported for community pharmacies. The researchers said they were unable to obtain detailed product acquisition cost data, discount percentages, and other financial information needed to conduct extensive cost analysis. "If mail order pharmacies do experience any economic efficiencies from their operations or inventory control policies, the data collected on average prescription selling price does not allow us to draw any conclusions as to whether the savings associated with these efficiencies are passed on to their customers," the report says. According to the profile depicted in the report, mail order businesses generally obtain most of their business from employer or other groups plans, including retiree health plans; enrollees over age 65 account for more than 50% of sales in dollars; most prescriptions were for chronic disease maintenance therapies, with orders for acute medications described as "rare"; firms market on a national basis; all large firms and most of the smaller firms use automated dispensing equipment; and most firms use a flat patient copayment, though the amount sometimes differed for generic and brandname products. The division of duties between pharmacists and other personnel was determined during the researchers' site visits to be "appropriate" and in line with standards set by professional groups. Despite differences such as inventory turnover and generic fill rate between mail service and community pharmacies, the data do not "appear to substantiate the mail service pharmacy claim that they could deliver maintenance drugs at substantially lower cost than community pharmacies," the researchers say. The researchers calculated a 56 cents per-day supply cost for mail service pharmacies, "essentially the same" as the 58 cents found for community pharmacies. The latter figure is based on community pharmacy research literature that retail operations averaged a $15.19 charge per prescription in 1988, with a 26-day supply. The report notes that the advantage mail order pharmacies gain by higher use of generics could be leveled out if a drug benefit like the one contained in the Catastrophic Care Act had been implemented, because it would have mandated greater use of generics by all pharmacies.
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