In mail order challenge, Walgreens tests 90-day prescriptions

Drug Store News, May 19, 2003 by James Frederick

CHICAGO -- Moving boldly to stave off fast-growing mail order competition and position itself for any Medicare drug benefit that Congress may approve this year, Walgreen Co. is testing long-term prescription dispensing of chronic-care medications.

Company officials confirmed they had begun testing the dispensing of 90-day supplies of some maintenance medications in some markets as a competitive response to mail order pharmacies and a customer convenience. The move, if adopted by other drug chains, could give retail pharmacy another weapon in a competitive arsenal that has been seriously challenged by mail-order pharmacy.

Fueled by the growing tendency of public and private third p arty prescription plans and prescription benefit management firms to shift their chronic-care patients to mail order, that segment of pharmacy has surged in sales and market share in recent years. According to IMS Health, mail order prescription sales jumped 21.7 percent in 2002, to $33.5 billion, outpacing the growth rates for all other pharmacy channels.

Now, with Congress and the Bush White House advancing various proposals to extend prescription drug benefits to some 11 million low-income seniors on Medicare, prospects for even higher growth rates among mail order houses loom on the horizon. The reason: virtually all Medicare reform plans that have gained ground in the House or Senate rely heavily on PBMs to form coverage networks and administer those benefits, drug retailers are concerned those PBMs could funnel many patients into their own mail order subsidiaries.

For Walgreens' part, "It's going to come down to what the customers want to do," chain p resident and chief operating officer Jeff Rein explained in an interview late last month. "It's very similar to when we put in drive-through pharmacy. There was a lot of debate within the company about whether we should do drive-through. People's assumptions that the customers wouldn't come in the store proved to be wrong. The customers considered it another ... way to get their medication.

"It's the same with the 90-day," Rein added. "Some folks, quite frankly, won't want it. They'll either feel it costs too much and they don't feel comfortable getting it all at once, or they may not want it sitting around for that long. But why shouldn't they be allowed to get the 90-day, if that what they want?"

Rein said the hurdles in offering extended-term prescriptions were operational. There was some concern, he said "that we might be missing out on some reimbursements because you're only filling the prescription once instead times. But I believe that can be balanced out. Obviously, if there are fewer reimbursements, there's also less work, because you've already filled the medication. So maybe you can have a reimbursement rate that's between the one- and three-time filling rate."

Payers, he said, are likely to support the 90-day fill for their chronic-care patients on maintenance medications, since "that's approximately how it works out now with mail order on the 90-day supply.

"To my knowledge, there are no federal or state problems. There are some contractual obligations, where ... some plans decree that the patient can only get a 34-day supply at the pharmacy. But we'll work that out, because from the payer point of view, we will show them it's going to be cost-neutral. It's not going to cost their employees any more."

The test was first reported by retail analyst Mark Miller of William Blair & Co. The move, he noted, is aimed at "positioning the company to compete across all modalities of script dispensing for a potential Medicare drug benefit."