Executive Summary

HOECHST-ROUSSEL's PRICING POLICY PRAISED by California pharmacists' group; 66 other pharmaceutical manufacturers declined to provide full information in response to a January survey by the California Pharmacists Association. CPhA's kudos to Hoechst- Roussel are based not only on the company's decision to share its pricing policy, an editorial and survey report in the June California Pharmacist indicates, but also on what the association sees as the fairness of Hoechst's pricing, which it calls a "standard against which all others should be compared." The survey, which asked manufacturers to provide current pricing policies, was conducted by CPhA in response to its members' concern over differential pricing and, specifically, pricing policy changes that are perceived by the group as manufacturers' attempts to "costshift" in response to the passage of the Pryor Medicaid rebate bill. Hoechst-Roussel's pricing policy, as set forth in its response to the survey, acknowledges only two basic customer types: government (federal, state, county, city) and non-government accounts. "As far as our pricing policy to government accounts, we do offer them an added price break, since we consider tax- supported institutions to have the 'most favored' customer status," Hoechst said. "In addition we feel that customers such as the [Veterans' Affairs Department] and the military do not compete with the retail drugstore trade," the company states in its survey response. For all non-government customers, Hoechst has a single pricing policy: wholesalers are offered AWP less a 16% discount; for all other customers, including chain drug accounts, direct drugstores, for-profit and non-profit hospitals and HMOs, the price is AWP less 14%. In its response, the pharmacy association congratulates Hoechst for having "the integrity to provide fairly-priced pharmaceuticals to all segments of providers." The California Pharmacist editorial and survey report, authored by CPhA District Trustee Alan Martin, represents the position of CPhA's Industry Issues Committee, which was formed to address discriminatory pricing and its effect on community pharmacies. Ten other drug-makers also provided the survey with some information on their pricing policies: Norwich Eaton, Boehringer Ingelheim, Roxane, Upjohn, Parke-Davis, Lilly, Rugby, Adria, Barre-National and Stuart/ICI. While Hoechst is singled out for praise in the editorial, CPhA and Martin have strong words for drug companies that are less forthcoming about their pricing. Martin focuses in particular on the perceived effect the passage of Sen. Pryor's (D-Ark.) Medicaid rebate bill has had on pharmacy pricing. He charges that although Congress hoped that the "best-price" obligation imposed by the rebate bill would force drugmakers to slow the rising cost of drugs to Medicaid, manufacturers' response "has been one of financial maneuvering to avoid any reduction in reimbursement to themselves." Many drug companies "are now either raising or holding steady on their prices to the retail marketplace while raising their bid prices to all other segments to avoid the best price provision of the Medicaid rebate agreement," the editorial maintains, citing Pryor's charges that "soaring prices are the result of drug companies' 'unbridled greed.'" Martin warns the manufacturers to make use of the rebate bill's four-year moratorium on reduction of Medicaid reimbursement of prescription drugs to negotiate fair pricing "before this 'deadline' passes and things fall into the hands of policymakers over which we have little or no control. Limits to the profitability of orphan drugs now appear to be only a first step in price control regulations that the government may begin to affix to pharmaceuticals," Martin asserts. "Everyone is entitled to a fair and reasonable profit, and now is the time to determine what levels that means before we are told what they will be." As a start, CPhA suggests, manufacturers "need to accept some financial responsibility in the Medicaid rebate program instead of cost-shifting the whole program into ineffectiveness. Even a token price reduction would have been instrumental in setting a tone of goodwill and cooperation." In answer to the self-posed question, "why should industry care what the practising pharmacist thinks about their pricing policy?," Martin responds: "As therapeutic decisions -- including generic substitution patterns and a possible pharmacist-only class of drugs -- become more likely, the pharmacist's product selection will help determine the financial impact on pharmaceutical manufacturers."