Let's help manufacturers climb off the 'tiger.'

Drug Store News, Sept 6, 1993 by Ken Rankin

For a generation now, retail pharmacists have been complaining about pharmaceutical manufacturer pricing practices which deny them access to the deep discounts available to institutions and HMOs.

And for just as long, many prescription drug manufacturers have been quietly commiserating with the chain and independent pharmacists who are overcharged as a result of these discriminatory prices.

Privately, at least, these manufacturers maintain that they would be happy to walk away from the irrational and unfair pricing systems under which retail drug stores are forced to pay top dollar for products that are sold to hospitals, HMOs and mail order dispensaries at discounts of up to 90 percent.

The problem, they say, is that when you're riding a tiger, it's hard to get off. Any manufacturer who unilaterally eliminates such discriminatory discounts would find its products clobbered by hospital formulary committees across the country.

Alternatively, any collective effort by several competing manufacturers to restructure drug prices would draw certain fire from Federal antitrusters.

The only way out, they contend, is federal legislation outlawing discriminatory pricing practices throughout the pharmaceutical industry.

Finally, retail pharmacy leaders are calling the manufacturers' bluff. Just last month NACDS and NARD fired off a joint letter to 140 top executives at pharmaceutical manufacturing companies asking them to join with drug chains and independent pharmacies in support of a new federal ban on pharmaceutical price discrimination (see related story beginning on page 1).

The vehicle for this legislation: the Clinton Administration's soon-to-be-announced proposal for health care reform. Operating under their newly-formed "Community Retail Pharmacy Health Care Reform Coalition," NARD and NACDS have spent much of the past six months garnering support for the abolition of discriminatory pharmaceutical pricing activities.

To date, the coalition's principles for health reform have won endorsements from 43 state pharmacy associations, the chain drug committees at 25 state retail associations, and such national organizations as the Food Marketing Institute and the American Pharmaceutical Association.

More importantly, perhaps, the NACDS/NARD proposal to curb drug price discrimination appears to have struck a receptive chord at the White House, where Administration health reformers are searching for ways to eliminate "cost shifting" in the health care marketplace.

In urging pharmaceutical manufacturers to join with retail pharmacy in support of restrictions on discriminatory pricing, coalition officials said the result could be major health care savings for consumers and taxpayers.

"Each day, on average over 5.6 million prescriptions are dispensed in community retail pharmacies to consumers who pay higher prices as a result of drug makers' cost shifting," NACDS president Ron Ziegler said.

"Conservative" estimates indicate that abolishing discriminatory pharmaceutical pricing practices would save at least $24 billion over the next five years, the coalition said.

Under the approach proposed by NACDS and NARD, price discounts based on "real economies" to manufacturers--such as volume discounts--would be available to all purchasers on an equal basis. Discounts not equally available to all pharmacies would be outlawed.

The retail pharmacy coalition has asked manufacturers to state their position on the proposed ban on price discrimination by this month--before the Clinton health reform plan is unveiled.

For manufacturers of prescription drugs it's time to put up, or shut up. Those who really want to get down from the tiger now have the opportunity to do so without being eaten alive. Those who stay on for the ride will do so at their own risk.