Pharmacies Self-Interest v. Silos v. Ignorance

Tuesday, July 2, 2013 | 0

Drugs dispensed by physicians account for $1.7 billion in workers’ comp costs.

Why don’t the big retail pharmacies care about physician dispensing in workers’ comp?

Why isn’t Walgreens, CVS, Rite-Aid and Medicine Shoppe up in arms about this?

After all, claimants who get their drugs from their docs don’t visit a drug store, don’t pick up those other essentials, don’t establish a relationship with a pharmacist and possibly a store.

I’ve been stumped by this for years. Here’s why. About 65% of a chain drug store’s sales are for drugs; for independents it's 93%. The margin on most of those medications is pretty thin and almost non-existent for Medicaid drugs in some states. Chain drug stores sell drugs to get people to come in and buy toothpaste and magazines and convenience foods and cosmetics, where they do make a decent profit. And independents live and die on drug sales; and these days, most are dying.

Yet anyone who’s tracked anti-physician dispensing efforts in Florida, Maryland, Hawaii, Michigan, Illinois – anywhere, has not seen hide nor hair of anyone remotely associated with a drug store.

Is this a case of silos, where the department/person responsible for workers’ comp drug sales has no power or influence or is measured on percentage margin and not total sales or profits (because workers' comp drugs are VERY profitable for pharmacies; the margins are many times those of drugs dispensed for group health plans).

Or is it ignorance, where the powers-that-be don’t care about workers' comp drugs because they only represent a couple percentage points of scripts? Of course, the total would be a lot higher if physicians weren’t dispensing, and this ignores the much higher profits on those drugs, but hey, ignorance is bliss, right?

Whatever the reason, it is abundantly clear that insurers, employers, pharmacy benefit managers and others (me, for instance) have been fighting chain and independent pharmacies’ battles for them.

If independents don’t sell drugs, they’re dead. And more are dying every day, as overall drug sales level off, and they are increasingly unable to compete with the chains and huge food and drugs. Yet I’ve never seen anyone from an independent pharmacy, or their national trade group, engaged in the issue.

Folks on workers’ comp are either employed or getting a check to cover lost wages; they need toiletries and food and other medications and batteries, stuff they’ll likely get from the big box store if they don’t come in to the corner drug store to get their workers’ comp meds. Yet the National Association of Chain Drug Stores and the other “advocacy” groups are nowhere on this issue.

It isn’t like I – and others – haven’t tried, multiple times, to get drug stores engaged. For whatever reason, there’s been no response.

Meanwhile, the investment and provider communities have figured out that workers’ comp is a great business – profitable, with relatively low regulatory risk. Comp is an “insulator,” a payer type that is removed from PPACA, Medicaid, Medicare and all the changes coming down from Washington; a service line not affected by budget cuts or Obamacare.

At some point, perhaps when the last independent drug store is about to close up shop, someone may say, “gosh, those dispensing docs sure killed our comp business; we could have used those dollars to stay open and profitable.”

Or a chain store exec may wonder, "gee, why is my average profit per script lower than ever?"

Or, more likely, not.

Joe Paduda is owner of Health Strategy Associates, a Connecticut-based employer consulting firm, and co-owner of CompPharma, a consortium of pharmacy benefit managers. This column was reprinted with his permission from his Managed Care Matters blog.