How to Kill Your Neighborhood Pharmacy

By Barrett Kalellis
Wednesday, Oct. 22, 2003

George Bernard Shaw once declared the revolutionary maxim that "hell is paved with good intentions, not with bad ones." In the very same spirit, a little-noticed clause in the new UAW-Big 3 labor contract is fraught with good intentions, but when implemented, could have the effect of putting your community druggist out of business.

In the attempt to stop upwardly spiraling prescription drug costs for its union workers, the Big 3 automakers, along with Visteon and Delphi, have mandated that workers purchase on-going ("maintenance") prescription medications from out-of-state mail-order houses instead of their local pharmacies.

A few news stories and editorials have remarked on this, but they have failed to see the cloven hoof lurking in the fine print – the ramifications the contract provision has, not only for Michigan’s economy but, in time, for all states.

Michigan law currently forbids retail pharmacies from filling prescription orders by mail, thus placing them at a crippling disadvantage with mail-order houses. But even if the law is changed to allow them to fill prescriptions by mail, it doesn’t address the real issues.

The dirty little secret is that this contract mandate is being driven by fiscal intermediaries that call themselves "pharmacy benefit managers (PBM)" – not people, however, but companies that specialize in the administration and management of prescription benefit programs.

The PBMs promise large companies, unions, health plans and others the vision of great savings on their drug benefit programs. And, indeed, through their huge volume purchasing clout, they are able to purchase drugs at steeply discounted rates.

They can also steer health care consumers and physicians into using particular drugs through mail-order companies they own, and they favor drugs that have high profit margins, ones on which they can receive sizable rebates from drug manufacturers.

Pending lawsuits against the four largest PBMs allege that they continue to inflate drug prices and do not pass along such discounted savings to their client members.

So, organizations that were brought in simply to analyze health care costs and administer cost-effective benefits impartially are now trying to monopolize the prescription distribution system by stipulating where members must purchase their medicines. This is predatory pricing and it is a clear conflict of interest, just as if physicians were allowed to own pharmacies.

Michigan pharmacies also would like to dispense 90-day supplies of maintenance drugs for one co-pay amount, but the PBMs deny this alternative, since all covered workers are offered only Hobson’s Choice: Use the PBM mail-order house for a 90-day supply or pay the full retail price at your neighborhood pharmacy.

This unfair advantage will most likely spread to other regions around the country as other unions in other industries use the UAW-Big 3 contract as a precedent to negotiate health care benefits for their workers. In each case, if these mail-order prescription mandates are allowed to stand, pharmacies that have large union worker customer bases could close their doors, wreaking havoc in these areas through lost jobs, taxes and school funding – sending local monies out of state into the increasingly monopolistic grip of the mail-order drug houses.

Given the choice, nine out of 10 patients choose their local pharmacist to fill prescriptions. A face-to-face chat with their pharmacist can resolve questions about dosage or quality, or any potential side effects from their medications. And local pharmacists are vigilant about counseling patients, particularly senior citizens, by helping them avoid medication errors while adhering to quality standards. With mail-order prescriptions, patients are at the mercy of nameless clerks in distant, undisclosed locations.

But if the PBMs have their way, retail pharmacies will remain uncompetitive and there will be no choice for consumers – everyone will have to get their medications from PBM mail-order houses. Since 90 percent of community pharmacy sales are prescription medications, the loss of a major portion of their income will have a devastating effect on their continued viability.

According to the National Association of Chain Drug Stores, there are 2,047 pharmacies in Michigan alone. Once the union contract health care provisions go into effect in February 2004, a significant number of pharmacies could cut their workforces or go out of business entirely.

It will start slowly at first – independent and chain stores with sizable customer bases of unionized contract workers will disappear. As new contracts with similar prescription drug benefits and restrictions are ratified throughout the warp and woof of U.S. workplaces – and even longer lists of medications are mandated – more and more neighborhood pharmacies will be swallowed up.

With these lopsided rules now in motion, local pharmacies are desperate for relief to level the playing field. Where, I might ask, do state legislators stand on this issue?

Barrett Kalellis is a Michigan-based columnist and writer whose articles appear regularly in various local and national print and online publications. He can be reached at


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