Mail-order battle heats up over generics

After 11 years in business on Main Street in Aspen, Colo., Rodney Diffendaffer, R.Ph., knows too well that the struggle between community pharmacists and the mail-order industry is heating up, with generics fueling the fire. "They get to sell three months of drugs at what comes close to my one-month price," he said. "I'm not allowed to sell a three-month supply. It's not a level playing field. Never has been."

Diffendaffer lost much of his senior clientele to Medicare Part D managed care mail-order programs this year. He worries about staying in business. "My customers are begging me not to quit because I offer the kind of service that mail order can't-personal service," he said. "But I don't know if I can take the kind of lost business Part D mail order has brought."

"Mail order is an effective way for our members to save money," said Mark Whitehead, manager of the Kaiser Permanente-Southern California mail-order operation. The penetration rate at Kaiser for mail-service pharmacy remains small, however: Only 5% of the region's nearly four million members use mail order.

According to research by IMS Health, mail order grew 18% in 2004 and another 7% in 2005. Last year, mail-order fulfillment represented 14.7% of the business, while chain business grew only 5%, and independents, like Diffendaffer's pharmacy, grew only 3%. IMS does not publish a separate distribution channel breakdown of generics, but notes that "generics ... posted strong sales growth [in 2005] of 20.6%."

"The growth of generics demonstrates the increasing influence that third-party payers are exerting as they switch patients to lower-cost therapy options," said Marc Benoff, practice leader of IMS' pricing and market access division.

IMS does offer some hope for the future to community R.Ph.s, however. In its 2005 year-end report, IMS said "the mail-service channel grew more rapidly than retail distribution channels for U.S. prescription drugs in 2005; however, rates of mail-order growth are expected to slow and retail growth to increase in 2006."

In June, the Pharmaceutical Care Management Association announced that several federal reports have found that mail order, including their members' operations, saves money. The group's press release reflects a long-term PCMA strategy to offset attempts by groups such as the National Community Pharmacists Association to promote state laws limiting the PBMs from making referrals to their own mail-order companies.

According to PCMA's press release, four studies conducted by federal agencies have concluded that "PBM mail-service pharmacies provide deeper savings than retail pharmacies, broad access to generic drugs, and are helping to drive overall prescription drug expenditures lower for consumers and public and private payers" (see "PCMA promotes mail-order reports").