Inside This Issue - Opinion
Rough sledding ahead for Rx
April 16th, 2012
by David Pinto, Editor
Virtually all of community pharmacy has benefited from Walgreens’ decision to stop honoring the prescriptions covered by Express Scripts as of January 1.
In the months since January every store with a pharmacy has picked up some of the prescription drug business that Walgreens has determined not to pursue. Some community pharmacy retailers have cashed in in a big way. A few have gone so far as to make a public display of the fact that Walgreens’ loss has been their windfall, ballooning sales and adding profit dollars at an unprecedented rate.
Now, less than five months into the new year, that party might be coming to an end. Earlier this month the Federal Trade Commission approved, without reservation, the merger between Express Scripts and Medco, two of the Big Three — Caremark is the third — pharmacy benefits managers.
The merging of Express Scripts and Medco opens the door to all kinds of monopolistic possibilities. The two control some 40% of all prescriptions dispensed in America, an even higher percentage of specialty prescriptions and an overwhelming 60% of all mail-order prescriptions. These are dangerous numbers, especially when placed in the hands of people who, judging from their public remarks, don’t think all that much of the value of retail pharmacists in terms of their ability to influence the health care marketplace.
Further fueling the new vulnerability of community pharmacy is the emerging belief, in some quarters, that many patients don’t really care all that much which community pharmacy dispenses their prescription — as long as: (1) it is convenient and (2) someone else is paying for it. There are at least some initial indications in this direction, based on the number of patients who have thus far responded to the advertising of Walgreens’ competitors to the effect that those competitors can quickly and painlessly fill Express Scripts prescriptions.
Let it be said at the start that, whatever the outcome, Walgreens, by any reckoning, has taken a bold and privately admired position in declining to fill Express Scripts prescriptions. Let it also be noted, however, that whatever the ultimate outcome, the PBM hasn’t suffered unduly to this point. But whatever the end result, it has quickly become apparent that community pharmacy is likely in for some rough sledding ahead.
The combination of Express Scripts and Medco appears to be an unassailable entity when it comes to dictating terms to the retail pharmacy community going forward. Which retailer, after all, can jeopardize its pharmacy business by standing up to this new combination when Walgreens, arguably the strongest community pharmacy retailer in the nation, hasn’t yet won a clear victory against a PBM only half as powerful as Express Scripts-Medco?
In the aftermath of the government approval of the Express Scripts-Medco merger there has been all kinds of talk from Express Scripts’ executive suite to the effect that the new entity will provide unprecedented money-saving advantages for patients. No one really believes this. At any rate, such savings as might possibly accrue to patients will come largely at the expense of the retail pharmacy community. Even now there are predictions that many independent pharmacies will not survive, so onerous will be the terms dictated to them going forward.
All of which raises anew these key questions: Could mass retailing’s various components have worked more diligently to prevent this merger or, at the least, prevented it in its most onerous form? Could the two major industry groups, the National Association of Chain Drug Stores and the National Community Pharmacists Association, have moved earlier to protest the merger? Could Walgreens’ competitors have resisted the all-but-irresistible impulse to quickly cash in on a situation that made it too susceptible to competitive inducements? Could the industry have seen this merger coming and come together in protest before the protest that did emerge was to prove inadequate?
We don’t pretend to know the answers to any of these questions. We do know this, however: The chain drug store community of an earlier era might have thought first of the health of its industry going forward and only secondarily of the increased business opportunities open to individual companies as the result of Walgreens’ action.
If the last-ditch legal action to block the merger initiated by NACDS, NCPA and nine of their members fails to convince the federal courts to intervene, community pharmacy can do little but wait until the new PBM begins dictating more onerous terms than have been available in the past — and determine which, if any, community pharmacy retailers can afford to decline to accept them.
The industry won’t have long to wait.