Stores Fight for Share in Medicare Bill

Monday, October 20th 2003, 12:00 am
By: News On 6

WASHINGTON (AP) _ The nation's drug stores and supermarkets are engaged in a furious lobbying campaign to limit the influence of rivals likely to play a prominent role in a prescription drug benefit for Medicare recipients.

The growing mail-order services owned by pharmacy benefit managers pose a threat to retailers. They fear being shut out of the market if the managers administer the benefit under Medicare and also sell drugs by mail order.

The House and Senate both approved bills earlier this year to create a prescription drug benefit for older Americans while embarking on the most thorough overhaul of Medicare since its creation in 1965.

Republicans in particular favor giving private health plans a new role in the program. They argue that competition will modernize health care for the elderly, as well as restrain future cost increases.

President Bush and congressional Republicans want to limit the cost of the new benefit to $400 billion over the next decade.

A poll released Sunday found that 70 percent of respondents thought it should be legal for Americans to buy prescription drugs outside the United States and import them; one in eight said they or someone in their home has done just that. While such purchases can save money, they violate federal law.

The poll of 1,000 adults was taken Oct. 9-13 and has a margin of error of plus or minus 3 percentage points.

Efforts to forge a compromise between the House and Senate bills has been sluggish, although the pace picked up in recent days.

The prospect that lawmakers actually might produce legislation in coming weeks has given new urgency to the lobbying effort.

Wal-Mart Stores, Walgreens, Giant Food, The Kroger Co. and other sellers of prescription drugs wrote House Speaker Dennis Hastert, calling the dual role by pharmacy benefit managers a conflict of interest.

A benefits manager ``that owns or operates a mail-order pharmacy has an incentive to direct prescriptions through their mail-order pharmacy,'' the companies said. Their letter cited a recent study that found ``self-dealing'' would cost taxpayers and the elderly between $14.5 billion and $29 billion over 10 years.

Congress has prohibited doctors who participate in government health programs from directing business to companies in which they have a financial interest. The pharmacies and their allies want a similar provision in the Medicare bill for pharmacy benefit managers, or PBMs.

Rep. John Boozman, R-Ark., whose district includes Wal-Mart headquarters, said, ``The self-dealing by the PBMs means higher costs. I think just common sense tells us that. How can you strike the best deal when you're dealing with yourself?''

The retailers also push their case by citing government allegations that Medco Health Solutions Inc., the largest pharmacy benefit-management company, pressured doctors to switch patients to medications made by its former owner, pharmaceutical giant Merck & Co.

But Sen. John Breaux, D-La., a member of the House-Senate negotiating team, said he does not believe there is support for ``saying (managers) can't do mail order themselves.'' He said this issue has yet to be addressed by negotiators.

Pharmacy benefit managers also have a ready answer to their opponents' claims with a study by Congress' investigative arm of their performance in administering drug coverage for federal employees.

The General Accounting Office said benefit managers saved money for the Federal Employees Health Benefits Program by ``obtaining drug price discounts from retail pharmacies and dispensing drugs at lower costs through their mail-order pharmacies.''

Chain drug stores and independent pharmacists disputed the GAO's findings.

Phil Blando, a spokesman for the Pharmaceutical Care Management Association, the PBM trade association, said stores ``are losing business to the mail-order (sector) because people want cheaper alternatives.''

The battle between retail pharmacies and benefit managers has raged for years. This month, two lawsuits filed in Alabama by independent pharmacies alleged ``anti-competitive practices'' against small pharmacies.

The suit names Medco, Caremark Rx Inc., Express Scripts Inc. and AdvancePCS Inc. as defendants.

Medco is the largest pharmacy benefit manager in the United States, followed by Advance PCS, Express Scripts and Caremark.

Caremark Rx Inc. last month announced plans to acquire AdvancePCS in a $5 billion-plus deal that will make it the No. 2 pharmacy benefit manager, with annual revenues of $23 billion.