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DUPONT-MERCK TAKING FINAL ORDERS FOR UNIT-DOSE PACKAGING

Executive Summary

DUPONT-MERCK TAKING FINAL ORDERS FOR UNIT-DOSE PACKAGING of four products, permitting hospitals to purchase up to a one-year supply of unit-dose packs at 1993 levels before the company discontinues the packaging format. Dupont-Merck notified hospital pharmacists of the change in a letter dated Oct. 25. The company will take final orders for unit dose packs of Coumadin, Percodan, Percocet and Symmetrel through Nov. 15, the letter states, and bill hospital pharmacies through wholesalers at current contract or list prices. In addition to the final one-year order of the products, Dupont-Merck notified the hospital pharmacists that "interim purchases may be made from your wholesaler while supplies last," and "of course, bottles will continue to be available through your wholesaler at usual prices." Unit-dose packs make up about 7% of overall unit sales of the four drugs, according to Dupont-Merck. Sinemet and Sinemet CR will continue to be sold in unit-dose packages, Dupont-Merck told the pharmacists, "as we are not the manufacturer." The company presented the decision to "discontinue the production, sale and distribution within the United States of all existing unit-dose blister packages of Coumadin, Percodan, Percocet and Symmetrel by end of year 1993" in the context of a series of "initiatives" it has been working on for the last several months that "make sense for doing business in this new, evolving, cost-conscious healthcare climate." Some initiatives "involve distribution improvements such as bar-coding and electronic data interchange, others dictate changes in our sales and marketing forces to reflect managed care and other customer changes, still others involve packaging that is less costly and environmentally friendly." The packaging was handled in-house by DuPont-Merck. DuPont-Merck said "production of low-margin unit-dose packaging is an unproductive, economic drain on our resources, and, by eliminating them, we will be able to continue to offer all customers reasonable prices for our medicines." As a result of the decision, "we have not and will not take a price increase on any of our proprietary products during 1993 and will not during the first quarter of 1994." DuPont-Merck also explained that "unit-dose packaging as a convenience is no longer necessary, as studies show the majority of hospitals now have capacity to do their own customized packaging." In addition, the company noted, "it has become apparent that, in some instances, the unit-dose products have been repackaged and diverted into the outpatient market," and "in the future we anticipate introducing new design packaging to meet current market needs/ conditions." Voluntary Hospitals of America estimates that the price it pays for Coumadin, the only one of the four products without a generic available, will rise from $2 per 100 pills to $50 per 100, based on the differential between the pricing of Coumadin in unit-dose packs and bottles. The non-profit alliance expects the elimination of the unit-dose packaging to multiply the price it pays for the drugs by 20 to 25 times. VHA says it asked to buy bottles of the drugs at a lower price and contract out the repackaging, but DuPont-Merck refused. The Hospital Corporation of America said that at its current use patterns, the purchase of the four drugs in bottled form would drive its costs up almost $700,000 per year. HCA orders "virtually everything" in unit-dose packaging, the company said, and is "very concerned" by DuPont-Merck's decision. One apparent result of DuPont-Merck's action will be to eliminate the difference in price paid by hospitals and other market segments. However, the chief proponents of ending "price discrimination" have not yet come out in support of the company's move. NARD and the National Association of Chain Drug Stores maintain that until the new price to hospitals is available they cannot determine whether it represents a move toward a uniform pricing policy. As a move toward a one-price policy, the DuPont-Merck action appears to test the waters to the pricing provisions put in the Clinton reform plan by Sen. Pryor. It would not be the first time that Dupont-Merck was one of the first companies to test the logical outcome of a proposed legislative change. The firm made a similar move about discount contracts just before OBRA '90 took effect. DuPont-Merck's announcement drew criticism from Rep. Stark (D- Calif.), chairman of the House Ways & Means/Health Subcommittee, who denounced the company's decision as "the Barbary Pirate definition of capitalism and free enterprise" in a statement released Nov. 2. Stark claims that DuPont-Merck is "potentially making administration of the drugs more dangerous and boosting the price by more than 700%."
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