Drugstore Lobby Wants New Collective Bargaining Powers

News provided by

Pharmaceutical Care Management Association

Mar 29, 2012, 09:42 ET

H.R. 1946 Could Raise Prescription Drug Costs by More Than $15 Billion for Employers, Unions, and Government Agencies

WASHINGTON, March 29, 2012 /PRNewswire-USNewswire/ -- The drugstore lobby wants special antitrust exemptions that would enable their industry to command higher pharmacy payments from the employers, unions and government agencies that offer prescription drug coverage. H.R. 1946 would raise prescription drug costs by up to $15.6 billion over the next five years, according to a new Charles River Associates study released by the Pharmaceutical Care Management Association (PCMA) today.

Click here to read the CRA study.

The lobbying effort comes on the heels of a recent U.S. News & World Report article that ranks pharmacists among the "Best Jobs" in America; a recent report by the National Association of Chain Drug Stores (NACDS) stating that more than 500 new independent drugstores have opened in the past two years; and U.S. Labor Department statistics showing the median pharmacist salary to be $111,570 a year.

"The drugstore lobby shouldn't be empowered to charge higher rates to America's small businesses, unions, and government agencies that provide prescription drug coverage. In any case, independent drugstores already join together and hire huge Pharmacy Service Administrative Organizations (PSAOs) to collectively bargain on their behalf," said PCMA President and CEO Mark Merritt.

New CRA Study: H.R. 1946 Would Increase Costs by Up to $15.6 billion

H.R. 1946 could increase direct costs to commercial payers by $7.6-$15.6 billion over five years, an average increase of approximately 4-8 percent of total prescription sales across all independent pharmacies.
Increased costs from antitrust exemptions to independent pharmacies would likely be passed on to health insurers, employers, and consumers and could result in employers reducing health insurance benefits.
While antitrust exemptions under H.R. 1946 do not apply to most federal programs, they would allow pharmacies to collectively bargain with plans in the new state-based health insurance exchanges, which could increase federal costs.
There is no compelling economic reason to confer antitrust exemptions to independent pharmacies, since these institutions are profitable and protected by existing competition laws.
Existing market mechanisms give independent pharmacies leverage to bargain with health plans and pharmacy benefit managers (PBMs). Nearly 80 percent of independent pharmacies rely on intermediaries known as Pharmacy Services Administration Organizations ("PSAOs") that pool the bargaining power of many independents to collectively negotiate reimbursement and contract terms with health plans and PBMs.

CBO: Collective Bargaining Would Increase Costs to the Federal Government

The Congressional Budget Office (CBO) has found that special antitrust protections for independent pharmacists would increase costs to the federal government and that increased drug costs to private health plans, employers, and consumers would result in "reductions in the scope or generosity of health insurance benefits, such as increased deductibles or higher copayments." CBO's analysis also contends that cost increases would be passed along to workers, reducing "both their taxable compensation and other fringe benefits."

FTC: Collective Bargaining a "Costly Step Backward"

During testimony before the House Judiciary Committee Antitrust Task Force, the Federal Trade Commission (FTC) called pharmacy antitrust exemptions a "costly step backward" noting that such exemptions "would allow pharmacies to engage in collective bargaining to secure higher fees" and would "increase costs to private employers who provide health care insurance… without any assurance of higher quality care."

Bargaining Tools Already Available to Independent Drugstores

In addition to PSAOs, independent drugstores also enjoy numerous bargaining tools to gain market power in government and commercial programs, including:

Independent drugstores participate in joint purchasing groups that allow them to lower their drug acquisition costs and compete more effectively.
Both Medicare and private insurers require geographic pharmacy network access standards for their enrollees that already provide pharmacies – particularly rural pharmacies – extensive negotiating power with PBMs.
All health care providers, including pharmacies, can form joint ventures with other pharmacies to provide quality and clinical services and negotiate the fees for those services.

Key points from the "Best Jobs of 2012" report include:

Job prospects for pharmacists should be excellent in the years to come and the earnings potential remains relatively high.
The Bureau of Labor Statistics projects 25.4 percent employment growth for pharmacists between 2010 and 2020, with the field adding 69,700 new jobs.
According to the Labor Department, the median annual salary for a pharmacist was $111,570 in 2010.

In contrast to the drugstore lobby agenda, PBMs will save consumers and payers nearly $2 trillion in prescription drug costs – a 35 percent savings – over the next decade.

PCMA represents the nation's pharmacy benefit managers (PBMs), which improve affordability and quality of care through the use of electronic prescribing (e-prescribing), generic alternatives, mail-service pharmacies, and other innovative tools for 216 million Americans.

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SOURCE Pharmaceutical Care Management Association