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COMMUNITY PHARMACY WILL SEEK PAYMENT DIRECTLY FROM HEALTH INSURERS FOR PROFESSIONAL SERVICES IN REFORMED HEALTH CARE SYSTEM, NACDS' ZIEGLER ASSERTS

Executive Summary

Community pharmacies should obtain payments directly from insurance plans for professional services that improve prescription therapy outcomes and help contain health care costs, National Association of Chain Drug Stores President Ron Ziegler declared at a Sept. 28 press briefing on health care reform sponsored jointly by NARD and NACDS. Chain and independent retail pharmacy "will come forward" in a reformed national health care system with "emerging structures" that will "deal directly, with the payer, directly with the ultimate plan, not with the brokers," Ziegler said. "Not until the payers," that is, the insurance company or health plan, "recognize the importance of pharmacy services to overall cost containment and...make the payment to the pharmacy, will we have truly achieved recognition and payment for that service," he maintained. Ziegler contended that payment for pharmacy services should come from health insurers, not claims managers. The NACDS official contrasted the goal of business relationships between pharmacy and ultimate payers against current arrangements in which pharmacies are paid by benefit managers, which he called "brokers" and "middlemen." Currently, "as third-party programs evolve, many of the administrators of the programs are turning into brokers," he said. NACDS and NARD criticized the recent agreement between PAID Prescriptions and the American Pharmaceutical Association as one in which a broker pays pharmacists for "moving products," not for pharmacy services. The Medco subsidiary PAID announced the formation of its "Coordinated Care Network" Sept. 20 ("The Pink Sheet" Sept. 27, p. 7). PAID enlisted the support of APhA to provide training for pharmacists for the second phase of the roll-out. APhA "endorsed a PAID Prescription program to provide payment for market movement services," Ziegler said. Referring to the network's payments for generic and therapeutic substitution by pharmacies, he contended: "This is not pharmacy care; this is simply paying the pharmacist to move one product to another product." Those who consider "third-party brokers" important to the future of pharmacy "are wrong," Ziegler declared. The APhA/PAID agreement "takes assets and sells to the payer," he maintained, adding: "We don't feel that's best for pharmacy in the future." NARD Exec VP Charles West suggested that community pharmacy will obtain formulary-based price breaks from manufacturers and "develop initiatives to operate in the new marketplace" created by reform. "Prior to this time manufacturers would not sell to" independent or chain pharmacy buying groups, he maintained. NARD Senior VP-Government Affairs and General Counsel John Rector highlighted the provision in the Clinton plan to eliminate pricing distinctions based solely on "class of trade." With elimination of this basis for differential pricing, pharmacy will "have equal access for all competitors to pricing," and "all the competitors" will be able to participate in a "Prescribers Choice- type program," not just a Medco mail-service pharmacy. Ziegler acknowledged that the Clinton draft proposal permits manufacturers to offer price breaks to buyers that provide the seller with "reasonable economic benefit," including the market share associated with restrictive formularies that influence physician prescribing. However, he contended that hospitals currently receive price breaks disproportionate to the effect they have on prescribing patterns. For example, Ziegler said, Schering sells NitroDUR nitroglycerin transdermal patches to hospitals at $2.03 per 100 but to community pharmacies at $114.77 per 100. Such a price spread involves "one major economic benefit, and it's coming from somewhere, and it's not a volume discount or a market [share] discount; it's an extraordinary, excessive, unsupportable spread," he maintained. The proposal "clearly will be structured to eliminate this type of farce in any pricing system." The NACDS president noted that his association stressed in a Sept. 24 letter to PAID that any agreement with APhA should not be characterized as an agreement with community pharmacy generally. The letter -- signed by Ziegler, NACDS Chairman Robert Hannan (Thrift Drug president) and officers of 41 member chains -- states that a Sept. 20 press release announcing the PAID/APhA agreement "seems to imply a pre-existing, broad-based endorsement for the [agreement] by community retail pharmacy." The thrust of the NACDS letter is similar to a criticism of the PAID/APhA agreement contained in a Sept. 21 letter from the NARD/NACDS coalition to state pharmacy associations. NACDS told PAID that "APhA endorsement of [the announced pharmacy network plan] or any other product offering you may propose, does not, nor will it have any relevance or bearing on the individual decisions our individual companies make about the program's benefit or appropriateness for our individual companies." The NARD/NACDS coalition pledged continued support for the Clinton Administration's health care reform proposal. Rector pointed out that the legislation includes "a safe harbor [provision] to permit the providers to negotiate with the plan" for reimbursement and with manufacturers for drug prices. It also repeals the insurance industry's McCarran-Ferguson exemption to antitrust laws that currently allow health insurers to fix prices and establish "tying agreements," requiring beneficiaries to obtain services from "restricted networks" of providers and mail- service pharmacies, Rector added. West explained that the coalition scheduled the press briefing to coincide with the start of legislative debate on health care reform and to emphasize its support for the Administration plan. "We will be heavily engaged in the process" in moving the proposal toward its enactment, he said. He added that NACDS and NARD were the only two associations represented at a Sept. 23 meeting with the Clintons and Gores "in the Blue Room at the White House with about 15 other business leaders." Ziegler said the coalition will issue public statements to push for the legislation and to counter negative attacks. The associations also plan to educate the public through their 60,000 member pharmacies. An example of a false industry criticism of the proposal, Ziegler said, is the statement that it contains price controls. There is no price-setting authority in the legislation, and "there is no comparison" between the proposal and the Canadian or British health care systems, he argued. References to Canadian and British price controls are "not even applicable or worthy of the debate." He maintained that nothing in the proposal suggests "that the price board is going in any way to control or set prices." Ziegler said he was "concerned" about "unworthy and unwarranted and unjustified" industry statements designed to create false fears that the proposal will inhibit pharmaceutical R&D. "In no way could the [proposal] detract from the incentives" for R&D, Ziegler contended. The industry spends $10 bil. in R&D and "$11 bil. to fund a 50,000-person sales force," he maintained. The suggestion "that health care reform will so diminish this 14% profit spread that they can take none of those dollars" to maintain industry R&D is "inconceivable for a logical mind to adopt." Ziegler reported that three "very small" manufacturers agreed to the coalition's request for support in eliminating "discriminatory" pricing through the Clinton Administration's health care reform proposal: B. F. Ascher, Martec Pharmaceutical and AkPharma. He noted that the coalition sent letters to 140 manufacturers Aug. 2, "asking them to support the coalition's effort to do away with" discriminatory pricing ("The Pink Sheet" Aug. 16, T&G-2). The fact that the coalition received "only three" positive replies "indicates that for some reason [the rest of the industry is] concerned that leveling the playing field would increase their competition," Ziegler said.
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