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Bitter pill for druggists: mail order

By Kristina Shevory
Seattle Times Eastside business reporter

KEN LAMBERT / THE SEATTLE TIMES Betsy Faulkner, left, co-owner of Woodinville Medical Center Pharmacy, is battling for survival against the growing presence of prescription mail-order companies.

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The co-owner of Woodinville Medical Center Pharmacy cut the hours of some full-time employees this summer and is trying to pick up more business making medication for doctors and veterinarians. But her sales have not rebounded, and she is filling 500 fewer prescriptions a month than she was in January.

"Going after new things takes more time and money, which is hard for a small business like mine," said Faulkner, who now fills 5,900 orders a month. "But without those niches, we probably wouldn't survive."

Faulkner is one of many pharmacy owners or managers hit hard by the growth in mail-order prescription sales. Buying prescriptions by mail offers lower co-pays and cheaper 90-day refills on long-term prescription drugs than buying from pharmacies.

In January, many local companies switched to medical-insurance plans with mail-order prescription service to try to cut health-care costs. As a result, drugstores are losing millions of dollars in revenue.

Those losses are forcing some pharmacies to add services and extend hours to bring in more customers, even while they trim staff to cut costs.

Larger chains are taking on mail-order services by selling 90-day refills at reduced prices.

Prescription sales are skyrocketing as baby boomers age, but that doesn't mean pharmacies are reaping bigger profits. Drug prices are climbing, and cheaper generic equivalents aren't always available.

Since January, when sales began to fall at Bob Johnson's Pharmacy in Ballard, owner Mike Donohue needed something else to boost his bottom line. He found it by selling more medication to assisted-living homes and making prescription drugs (compounding drugs) for doctors.

Although assisted-living centers have helped his sales, the work takes more space and staff time.

"I have a great number of customers who I've lost since January," Donohue said. "We're in a box and don't have a choice but to go after new business."

But even the new business wasn't enough. In July, Donohue laid off a full-time pharmacist who had worked for him for three years. The layoff shaved 25 percent from Donohue's wage costs.

"We really had no choice," Donohue said. "The assisted-living business is growing, and [making prescription drugs] makes money, but it doesn't grow overnight. If it had been a few smaller accounts [that switched to mail order], we would have been able to adapt."

Large chain drugstores are also feeling the pinch.

Last September, Rite Aid lowered its profit and revenue forecast for the rest of the year because of rising competition from mail-order pharmacies. The Camp Hill, Pa.-based chain now expects sales of about $16.9 billion, compared with previous projections of $17.3 billion. The company plans a nationwide advertising campaign that will include television ads and circulars, and it is trying to hold down costs and improve customer satisfaction.

Walgreens and Bartell Drugs are fighting back in other ways.

Last fall, Walgreens began selling 90-day prescriptions at reduced prices through its pharmacy-benefit program. Members of the program can buy three-month refills in Walgreens stores, through its mail-order program and at other drugstores. More than 75 insurance companies and businesses have joined the program since its debut in September 2003, Walgreens spokesman Michael Polzin said.

Bartell Drugs is opening more stores with 24-hour pharmacies; updating its stores (about five of its 53 stores a year); offering more services, such as bone-density tests; and bringing more products to the front of the store, said Mike McMurray, vice president for special projects for the local chain. The company hopes the digital-photo printers it has installed in its stores will draw customers who want to print pictures from their digital cameras.

Although mail-order prescription service has been around for well over a decade, it only recently became a threat to traditional pharmacies.

As employers try to rein in health-care costs — which are rising an average of 13 percent a year, according to a Mercer Human Resources Consulting survey in July — they are turning increasingly to mail-order for long-term prescription drugs. Pharmacy-benefit managers, companies that buy drugs in bulk at heavy discounts and run mail-order services, have pushed more companies to move away from traditional drug-benefit plans.

Over the past year, a rising number of businesses have moved to mail-order, including Boeing, Safeco, General Motors, Microsoft and Ford Motor.

In January, Safeco made mail-order service mandatory, company spokesman Paul Hollie said. Employees can fill each long-term prescription twice over the counter but then must order them through the mail to be covered by insurance. The move was part of the insurer's plan to cut $75 million in expenses by the end of this year.

Microsoft switched to mail order in January as part of a plan to shave $60 million in costs. Employees now have to get their long-term prescriptions filled by mail.

The move to mail order is raising concerns among pharmacists about public health. Ordering long-term drugs through the mail eliminates counseling from pharmacists who can prevent drug interactions and suggest alternatives. Although mail-order companies offer counseling by phone, pharmacists and customers say that it's often difficult to reach a person.

Some medication can also be damaged in the mail or exposed to temperatures that ruin it.

"Mail order puts a person's health in danger," said Bill McNary, owner of Morton's United Drug in West Seattle and Maple Leaf Pharmacy & Compounding in North Seattle.

"There could be fatal or life-threatening drug interactions, particularly with blood pressure, heart, hormone replacement and anti-inflammatory conditions."

Pam Duncan has grown increasingly leery about mail order. When she calls up her mail-order company, she gets a different person each time who doesn't know her family members' medical background and may not be aware of all the drugs they're taking.

"[Mail-order companies] send you all this great paperwork when you enroll," said Duncan, who works at Microsoft. "But the big problem is when you call and they don't know the patient."

Worse, she says, the mail-order service once switched a prescription. The company could no longer get one of her medications from a supplier and asked her doctor to change her prescription. He did, but she didn't find out about the change until she got the new medication in the mail and called to find out why it was different.

Duncan goes to her local pharmacy for information whenever one of her family's 15 prescription are changed.

"Having the option between mail order and a local pharmacy is the most important to me," she said. "I would [rather] pay a minimal co-pay at my local drugstore than go through mail order. It's all about peace of mind."

Kristina Shevory: 206-464-2039 or kshevory@seattletimes.com

Copyright © 2004 The Seattle Times Company

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