2008 fast forward

1. Mum’s the M-word?

Pharmacy operators still are losing sleep over the “M” words—Medicare, Medicaid and mail-order pharmacy. But developments on all three fronts could make 2008 a better year for community pharmacy.

Perhaps the most dramatic development was the mid-December decision by U.S. District Court Judge Royce Lamberth in a lawsuit filed by the National Association of Chain Drug Stores and the National Association of Community Pharmacists. Lam-berth ruled that the Centers for Medicare and Medicaid Services would not be permitted to post data on the Internet related to the average manufacturer price of generic pharmaceuticals purchased for the Medicaid program. Even more significant in the near term, Lamberth granted an injunction that will prevent CMS from adopting the reduced AMP-based reimbursement formula for generic prescriptions dispensed to Medicaid patients until he’s had an opportunity to fully review the payment plan.

With the new reimbursement rule set to take effect Jan. 30, the court injunction was a huge, if temporary, victory for retail pharmacy. It sets the stage for the next step in pharmacy’s campaign in Congress and in the courts for a fair and reasonable payment for prescriptions dispensed under Medicaid—a campaign likely to play out this year.

2. Revving up the health IT revolution?

With so many forces now pushing for nationwide adoption of health IT and e-prescribing, 2008 could see the turning point in the health IT revolution.

This is likely to be the year in which doctors’ resistance to paperless prescribing, as well as new communications and record-keeping automation, is finally overwhelmed by cheaper technology—and by the growing realization among physicians that the benefits of an integrated electronic communications and data-storage platform will, in the long run, far outweigh the costs.

The forces for change are becoming irresistible. Pharmacy leaders, lawmakers, White House policy makers, medication safety advocates and technology vendors are all arrayed behind the drive for e-prescribing. On a broader scale, they’re also driving a sweeping transformation of the entire U.S. health care system through health IT.

For the most part, community pharmacy is ready. Most pharmacies already are equipped with the technology to link up seamlessly with an integrated health IT platform, and 40,000 of them are accepting paperless prescriptions, according to SureScripts.

So far, fewer than 1-in-10 physicians are linked through that platform. But the numbers are rising fast, with SureScripts predicting that roughly 1-in-7 will be e-prescribing by year-end.

3. Beyond dispensing: proving the value of retail pharmacy

A tectonic shift is underway in retail pharmacy.

Health plan payers, the Medicare and Medicaid programs and pharmacy benefit managers have staged a long-term assault on profit margins at the pharmacy counter and in many cases turned prescription dispensing into little more than a commodity business. The cash-strapped U.S. healthcare system is due for wrenching change, no matter which Democrat or Republican wins the White House this fall, as voters and lawmakers demand wider coverage and lower costs.

At the same time, health IT and e-prescribing are transforming the way clinical and preventive health services and disease management are delivered. Patients are demanding more healthcare options and a central role in their own well-being. And Congress, the federal government and Medicare beneficiaries are demanding concrete solutions to the medication therapy management puzzle.

In the midst of all this, it’s no wonder that chains and independents are scrambling to bridge the gap between basic prescription dispensing and counseling services on the one hand, and demonstrable, value-added patient care services on the other. One strong example has been the work accomplished through the Asheville Project. Indeed, community pharmacy will continue to drive the agenda to ally with local physicians to develop similar programs that can demonstrate and document their clinical care efforts.

The determined push by retail pharmacy to add value as an ancillary healthcare resource for patients—and for their physicians and care-givers—comes at a critical time for the U.S. healthcare system. Fixing that system, and making it more accessible and more affordable to Americans, has become an election-year hot button, and no serious candidate for president can avoid the task of developing a detailed set of solutions.

4. Generic profitability under fire?

Brand-name drugs with about $20 billion in annual sales will face patent expiration in 2008, similar to amounts seen over the past two years. Leading the list are such drugs as Risperdal, Fosamax, Topamax, Lamictal and Depakote. This should help drive generic growth by about 14 percent to 15 percent next year, to more than $70 billion. In 2008, more than two-thirds of all prescriptions written in the United States are expected to be for generics.

But the big question for pharmacy retailers is pressure on generic profitability. Generic drugs rack up a disproportionate amount of the profitability in pharmacy. The average gross margin on a branded pharmaceutical is about 15 percent versus 50 percent for a generic.

Generic pricing currently is caught in the crosshairs of two very powerful forces: the federal government and Wal-Mart. Indeed, a great deal of the Medicaid reimbursement cuts pharmacy retailers could be facing comes at the expense of generics under CMS’ proposed AMP formula for pharmacy reimbursement. Fortunately, this is a bullet community pharmacy appears to have dodged for now, thanks to the recent injunction a federal judge granted the industry one week before Christmas while he considers the merits of community pharmacy’s larger suit against CMS and the U.S. Department of Health and Human Services.

Meanwhile, even as Wal-Mart insists that its $4 generic drug program has not impacted its profitability—just the opposite, executives have argued—traditional drug store chains insist the program, or “marketing stunt” as many have called it, has done little to negatively impact their businesses. The much larger issue, of course, is the world’s biggest retailer’s claims that the program targets unnecessary inefficiencies in the pharmaceutical supply chain; clearly, a conflicting message as community pharmacy preaches the value of community pharmacy to payers and policy makers.

Certainly, the profit picture would stand to benefit immensely from any legislation that would create an approval pathway for generic versions of biotech drugs. The Senate Health, Education, Labor and Pensions Committee approved in June the Biologics Price Competition and Innovation Act of 2007. The House is expected to take up similar legislation in 2008.

5. BTC or not to BTC?

A BTC class of drugs will have a snowball’s chance in a really hot place of becoming reality this year. But that’s not going to stop people from talking about it. In theory, BTC could open the doors wide to a number of therapies that would necessitate a consultation with a healthcare professional—not just a doctor—where the neighborhood druggist takes on added responsibility, in a sense “prescribing” things like muscle relaxants, statins or triptans.

But in reality, BTC could become a new battleground between pharmacists and doctors. Some worry a third class of drugs might only further erode doctor visits. For that reason, some doctors groups have intimated that pharmacists aren’t qualified to diagnose and treat disease.