Pharmacy's wild card

Supermarket pharmacies can look forward to a surge in the volume of prescription customers beginning this month, but whether that's a blessing or curse to the retailer remains to be seen; much depends on how well prepared pharmacies are to deal with the impact of the new drug discount card program.

The Medicare Prescription Drug Discount Card and Transitional Assistance Program was enacted into law December 2003 as part of the Medicare Prescription Drug Improvement and Modernization Act of 2003. The purpose of the program is to give immediate relief to seniors and disabled people covered under Medicare by helping to reduce their prescription drug costs before the new Medicare drug benefit goes into effect Jan. 1, 2006.

Today Medicare beneficiaries without outpatient drug coverage pay among the highest prices for prescription drugs—as much as 20 percent higher than people who have drug coverage, according to the Centers for Medicare & Medicaid Services (CMS).

This is having a clear impact on seniors' spending on prescription drugs. According to a survey commissioned by the Pharmacy Care Alliance, a not-for-profit organization composed of the National Association of Chain Drug Stores (NACDS) and Express Scripts, Inc., a pharmacy benefit manager, 53 percent of Medicare beneficiaries without prescription drug coverage find it difficult to cover their prescription drug costs. In addition, 23 percent say they either haven't filled a prescription or haven't refilled a prescription because of cost, and 23 percent have tried to stretch their prescriptions by taking their medications less often than prescribed or by taking smaller doses than they're supposed to, in order to save money.

CMS estimates that 10 million American seniors on Medicare don't have coverage for prescription drugs. Under the Medicare Prescription Drug Discount Program, CMS expects these seniors to save 10 percent to 15 percent on their total drug spending, with discounts of up to 25 percent or more on individual prescription drugs.

Last month Medicare beneficiaries—except for those who have Medicaid drug coverage—had the opportunity to begin enrolling in a Medicare-approved prescription drug card program to help reduce their prescription drug costs. Starting this month, the cards will provide discounts off the regular cash price of prescription drugs.

Also beginning this month, Medicare will provide $600 in 2004, and up to an additional $600 in 2005, to Medicare beneficiaries whose incomes are not more than 135 percent of the poverty line ($12,123 for single individuals or $16,362 for married individuals in 2003) if they don't have certain other drug coverage. These funds will be provided through the Medicare-approved drug discount card program in which the beneficiary enrolls.

When applying the $600 toward prescription drug purchases, beneficiaries at or below 100 percent of the poverty line will pay a 5 percent co-insurance deductible, and beneficiaries above 100 percent of the poverty line will pay a 10 percent co-insurance deductible.

These Medicare-approved discount cards must provide convenient access to retail pharmacies, and while these programs may offer mail-order options in addition to a contracted retail pharmacy network, it can't be a mail-order-only program, and they can't require enrollees to use mail-order pharmacies.

Sales opportunities

This potential addition of 10 million people to the pharmacy business base presents an opportunity for supermarket pharmacies to increase their prescription counts, as well as corresponding OTC sales. These pharmacy customers will have more incentive to fill their prescriptions and to take them regularly once they're filled.

But the discount card program may also pose some challenges, according to John Fegan, v.p. of pharmacy for Ahold USA, who spoke during a session called "Medicare Issues for Stores with Pharmacy Operations" at this year's FMI show in Chicago.

"There may be increased labor costs associated with an increased volume of questions to the pharmacy staff," Fegan says. "So far there are 28 drug card sponsors with 50 different programs covering 209 categories of drugs. How will seniors know which program is best for them? They have to check with the pharmacist. How will they know prescription prices, which could change weekly with manufacturers' price changes? They have to check with the pharmacist."

In addition, pharmacies may face decreased margins associated with the competitive bid participation process. There might also be increased claim processing and inquiry costs associated with multiple transmittal of prescription claim information as the retailer searches for the best price for the senior.

For retailers to make the most of the drug card program, Fegan recommends that retail pharmacies be proactive in delivering information about the program, both to staff members and consumers. "You need to educate your pharmacy teams on the programs and provide adequate staffing for our pharmacies so we can attract customers through service," he says.

Indeed, pharmacy customers who are offered the opportunity to speak with a pharmacist are much more likely to be satisfied with the experience and would return to that pharmacy for future prescription refills, according to a study by New Hope, Pa.-based Wilson Health Information, a health care marketing research company. "This is a complicated issue," Fegan says. "It's important to get the necessary information to the consumers, in addition to information provided by the pharmacist and his staff. Pharmacies should set up information tables, Web sites, and even telephone help lines, when possible."