Objections Slow Mail Order Rx Bill

October 31, 2003
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LANSING — The state lawmaker behind a bill designed to aid independent pharmacists by banning favorable reimbursement terms from health plans for mail-order medications is seeking a compromise.

Because he faces a wall of opposition from business advocates worried about rising health-care costs, Rep. Gary Newell, R-Saranac, plans to hold off pushing his bill that would require insurers and HMOs to stop differentiating between prescriptions filled at a retail pharmacy and those filled for longer periods through mail-order pharmacies.

Many insurers and HMOs, as a cost-containment tool, limit some prescriptions filled at retail pharmacies to 30 days but pay for a 90-day mail-order prescription.

The latter arrangement allows consumers to incur only a single co-pay instead of three co-pays for the same amount of medication. The requirement is typically in place for medications people take on a regular basis, or so-called maintenance drugs.

At a time when small, independent pharmacies face stiff competition from mail-order prescriptions, including large national drug store chains with their own mail-order operations, Newell saw his bill as helping small retail pharmacies and upholding consumer choice by enabling people to have all prescriptions filled for 90 days at their local pharmacy.

The second-term lawmaker, noting that there is no mail-order prescription service based in Michigan, also wanted to keep some of the money spent on those medications within Michigan.

"That seems like a good thing if we can keep some of those dollars in the state rather than send them all somewhere else," he said.

That desire ran head on into the interests of business groups, consumer advocates and labor unions that see lower-cost mail-order prescriptions as one way to begin controlling skyrocketing health-care costs.

Newell has since put together a legislative workgroup and hopes he can formulate a compromise bill that would serve the interests of those worried about costs and pharmacies struggling to compete.

"I'm sensitive to the costs that are already there," said Newell, noting that "every business group in the world started calling and knocking on my door" when he introduced the bill in July.

"I still think there are ways out there we can help," he said. "I like to think there may be a solution out there and will continue to work on it. We've got to look for another way to get it done and provide for some of the same results."

Insurers, HMOs and employers have increasingly turned to mail-order prescription options as a way to contain the rising costs of health plans that include prescription coverage.

Grand Rapids-based health plan Priority Health's mail-order dispensing rate grew from 8.5 percent in 2001 to 9.9 percent in 2002 and 11.5 percent through September 2003. Priority Health, with more than 400,000 members in its various health plans, spent $132 million last year on prescription drugs.

The use of mail-order services is expected to get a major boost through the recent United Auto Workers contract with Ford, GM and DaimlerChrysler covering thousands of employees and retirees that includes a landmark provision that requires autoworkers to begin using mail-order prescriptions for maintenance medications.

The trade association representing pharmacists in Michigan contends the preferential reimbursements that insurers and HMOs provide for mail-order operations puts its members at a competitive disadvantage.

"What we're asking for is a level playing field," said Larry Wagenknecht, chief executive officer of the Michigan Pharmacists Association. "It's accessing the ability to participate. Certainly our intention is not to increase the cost of health care either."

The new UAW contract will only worsen the competitive disadvantage for pharmacists, the association argues. In an Oct. 17 alert to members, the association also claims that mail orders have created delays for consumers in receiving their medications, ruins the pharmacist-patient relationship and siphons money out of the state.

Several factors — automation, greater discounts from volume purchasing and lower dispensing fees — combine to make mail-order prescriptions less costly, said Paul Kociemba, clinical pharmacy manager for Priority Health.

As the costs of prescription medications skyrocket with overall high care costs, eliminating the ability of payers to differentiate between how they reimburse mail-order and retail pharmacies "would harm the effectiveness and the ability to manage those costs," Kociemba said.

Opponents to Newell's bill last week released a study showing that eliminating the cost savings of mail-order prescriptions would increase costs for consumers and employers in Michigan by $71 million.

"At a time of rising health care costs, the Legislature should be supportive of innovative health care cost containment measures, such as mail order pharmacy, not work against them," said Nancy McKeague, senior vice president for human resources and administration at the Michigan Chamber of Commerce.

State law presently prohibits retail pharmacies from selling prescription medications by mail.

One suggestion for any compromise bill that Newell may draft is to lift that ban, a move that would enable pharmacists to form a cooperative mail-order operation.

"Then it's up to them to compete," said Brian Broderick, legislative director for the business-labor coalition Economic Alliance for Michigan.

But the issue isn't that simple, Wagenknecht said.

Mail-order pharmacies have the business locked up, he said. Pharmaceutical manufacturers have been unwilling to share with retail pharmacies the same price discounts as mail-order businesses, Wagenknecht said.

He termed the idea a "superficial Band-Aid" that's "not going to change a thing."

"The issue is deeper than that," Wagenknecht said. "It may be a partial solution, but it's not a full solution."

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