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Executive Summary

NACDS member chains have added 897 new pharmacy units during the first eight months of 1990, National Association of Chain Drug Stores President Ronald Ziegler reported Aug. 26. Growing by 4.5% in the number of total drug outlets during 1990, NACDS members now operate 20,800 pharmacies, Ziegler told the annual Pharmaceutical Conference in Anaheim, California. Despite the cost and competitive pressures of retail pharmacy, Ziegler said, the chain drug industry "has not only maintained its is growing." Ziegler's optimistic report on the industry come despite the continuing headlines of financial difficulties currently faced by some individual members. Within the preceding few weeks, for example, Revco announced it is selling 146 of its stores as part of its bankruptcy restructuring plan; Fantle's announced it was unable to turn around the earlier-acquired Dart Drug chain quickly enough to satisfy bankruptcy creditors, and "disappointing earnings by Thrifty Drug have led to top management changes ("The Pink Sheet" Aug. 27, T&G-4-5). "The chain drug industry is in a time of transition" and faces "fierce and intense competition," Ziegler stated. He added: "Pharmacy is the core of the chain drug store industry. It is the unique service that sets us apart -- and we will protect that franchise." Ziegler reiterated that NACDS' strategy includes emphasizing its research program on retail pharmacy issues. Recent projects included separate Gallup Organization and Peter D. Hart Associates surveys on the public's view of pharmacy ("The Pink Sheet" April 30, p. 13). A forthcoming study will look at the volume of prescriptions filled and dispensing locations. "We are not looking for short-term public relations victories," Ziegler continued. "We are looking to make and participate in fundamental changes in pharmacy where fundamental changes are required. For example, in the area of Medicaid, there is a fundamental need to change the pharmacy reimbursement structure...It requires a change from the carelessly regulated reimbursement structure that we have today to a competitive, market-based structure." Ziegler's remarks also pointed up retail pharmacy's split with manufacturers over proposed Medicaid drug payment cuts. Contrary to impressions "created by some -- including some of our manufacturer groups -- retail pharmacy in this country, in dispensing Medicaid prescriptions, is losing money, not making it," the exec maintained. "And retail pharmacy can no longer absorb the cost and payment pressures in this area. It is now time for others to do their share." The conference included a panel discussion Aug. 27 of health care access and financing, moderated by Harvard law professor Arthur Miller. Georgia State University Center for Insurance Research Associate Director Deborah Chollet, PhD, predicted that any national policy to reform health care financing will emphasize state-level programs. Discussing "essential features of any national reform of health care financing to be feasible in the next decade," Chollet stated that "any national reforms will be state-based." State programs "accommodate local health care service delivery markets. They accommodate existing Medicaid programs and potentially, and maybe most importantly, they can accommodate the need to keep the net new costs of health care financing reform off the federal budget." Chollet, who previously served as executive director of the HHS Advisory Council on Social Security and as a researcher at the Washington, D.C.-based Employee Benefits Research Institute, also predicted that national policy reform will focus on managed care programs to help hold down costs despite, she asserted, their "unproven success." Thus, according to Chollet, "we'll rely heavily on HMOs and on PPOs simply because there appear to be no reasonable alternatives at this point." Other suggested implications of a national emphasis on managed care include greater efforts at assessing the effectiveness of health care procedures, less freedom of choice for public health program participants in choosing caregivers, and perhaps, tax code revisions to reduce tax advantages for less effective forms of health coverage. John Rodriguez, director of the California Medicaid program Medi-Cal, which has been a leading state in revamping pharmaceutical payments, outlined five "generic policy options" that are likely to be included in any health care financing reform. These are: giving more attention to setting spending priorities among competing needs; increasing the cost-effectiveness of service delivery and demanding for value for the health care dollar; expanding insurance availability; increasing the role for health promotion approaches; and searching for new funding sources. When Miller asked why there are so many "complaints" on cost of pharmaceuticals if they are generally seen as one of the more cost-effective components of care, Rodriguez responded that drug prices have increased twice as fast as other components, and "until recently" have been "largely unregulated." The annual pharmaceutical conference also marks a change in membership for NACDS' Pharmacy Affairs Committee. The committee's new chairman is Payless VP John Young, succeeding Revco VP Al Sebok. In addition, Walgreen VP William Thien joins the committee, replacing Perry Drug Stores VP Robert Shapiro.

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