FMI view on Medicare reform undercuts retail pharmacy

Drug Store News,  July 21, 2003  by Rob Eder

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Ever since Drug Store News got its hands on the June 5 letter Food Marketing Institute senior vice president of government and public affairs John Motley sent to House Ways and Means chairman Bill Thomas, expressing the supermarket industry s "strong support" for the House's Medicare drug benefit bill, I find myself asking the same question. What was FMI thinking?

And I am sure that the other members of the Pharmacy Benefits All coalition are asking the same question. FMI didn't discuss its decision to break ranks with retail pharmacy. In doing so, it seriously compromised retail pharmacy's position as industry leaders continue negotiations with key congressional committees to ensure that the final proposal that is delivered to President Bush this fall is a lot more favorable than either of the two bills originally put forth by the House and Senate.

Because when you get right down to it, the original House and Senate bills are rife with threats to the future of retail pharmacy, including:

* The Medicare-endorsed prescription drug discount card programs that would take effect in the next several months until the full Medicare prescription drug plan would kick in. The card reduces the price that pharmacies can charge for a prescription but does nothing to address the pharmacy's acquisition costs. Then there is the concern that these card programs are designed to artificially shift patients to mail order. And while the card program would stay in effect only until 2006, there is growing speculation that because of the inherent challenges that exist in hammering out a risk-based insurance model for a Medicare prescription drug benefit, the card would become a much longer-term program than anyone ever anticipated.

* Uninsured seniors represent a cash business for retail pharmacy. Converting them to any form of third party payment is obviously going to mean greater margin erosion. But the original Senate and House bills have the PBMs administering the program, setting up preferred provider networks and most likely creating inadequate pharmacy reimbursement levels that shift patients into their own mail order programs. So these customers go from being the most profitable to perhaps the least profitable.

* Mail order, of course, wouldn't be such a threat to chain pharmacy if either of the bills prevented PBMs from creating tiered co-pays that make mail order a cheaper option for the patient than community pharmacy. The original bills did not even address the subject of 90-day fill for maintenance drug patients.

Theoretically speaking, all of those things could be as bad for supermarkets that operate pharmacies as they would be for free-standing drug stores. So you would have to wonder why FMI would lend support to the original bills--even as NACDS president and chief executive officer Craig Fuller and other pharmacy leaders are so close to negotiating a much better deal for retail pharmacy.

In an interview with senior pharmacy editor Jim Frederick, FMI's Motley told Drug Store News that the original House and Senate bills provided a program its members "felt they could compete under in the future." The pharmacy coalition, he added, was asking for things that were unreasonable--things like transparency in PBM bookkeeping, as well as how PBMs award pharmacy contracts.

If that is such an unreasonable request, how come a Senate amendment introduced by Sens. Jack Reed, D-Rd., and Michael Enzi, R-Wyo., which clearly addressed the subject of transparency passed by a resounding 95-0 vote?

"The amendment would hold Medicare drug plans ... accountable for passing on to their consumers a fair portion of the rebates, discounts and other incentives the plans may receive from drug manufacturers and other sources," Enzi told fellow lawmakers in an address from the Senate floor. "The amendment would require disclosure of these incentives to the Federal government."

It doesn't sound like the Senate thought it too unreasonable.

So you have to ask yourself, why does FMI send those letters? How does it get several of its members, including Ahold, Kroger and Winn-Dixie, to send similar letters? Does FMI really represent here the views of the 12,000 pharmacies its members operate? There is one very large FMI member whose absence has been highly conspicuous. Where is Wal-Mart s letter? Drug, Store News has learned that Wal-Mart doesn't support FMI's position on this issue.

If you have been following Medicare reform as closely as Drug Store News has over the last several months, you re probably asking yourself that same question. What was FMI thinking?

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