Read the article attached at the buttom and summarize it in two doublespaced pages and one doublespaced page opposing viewpoints related to the article along with your opinion.
Often times opposite opinions surface. This is a good spot to include those opinions, support your viewpoints, along with analysis.Current rebuttals appear online, in op ed pages or random newspaper articles. In which case this infomation lends itself to a deeper analysis. Therefore, after your written analysis, the one doublespaced paper should include any opposing viewpoints related to the article, along with your opinion.
HERE IS THE ARTICLE:
On The Cover/Top Stories
In The Pill Box
Emily Lambert, 04.26.04
Giant Walgreen has never been so prosperous. Now watch the pharmacy chain try to fend off the mighty mailbox.
Walgreen Co., the nation's largest pharmacy, is a growth story for the ages. The stock is up more than 3,000% over the last 20 years. Same-store sales rose 9% in fiscal 2003 at the 103-year-old chain, which is sitting on $1 billion in cash. Plans are to build 3,000 new stores by 2010 on top of the 4,336 it already has.
Could anything go wrong with this happy story? Yes. Pharmacy benefit managers.
PBMs advise employers and health maintenance organizations how to save money on prescription drug costs. And one way they do that--or claim to--is by having patients get their long-term prescriptions (say for diabetes or cholesterol drugs) by mail. Often the patients are offered the option (or given a mandate) to get their pills this way. Bad enough that the retail pharmacy loses the sale; Walgreen (nyse: WAG - news - people ) got 62% of its $32.5 billion in revenues in the Aug. 31, 2003 fiscal year from filling prescriptions. The other pain is that the patient is not in a Walgreen store picking up items like lipstick and beach balls on the way to the prescription counter. Nonprescription items account for about half of the chain's $1.2 billion in annual net.
Walgreen isn't going to disappear tomorrow. Its prescription sales grew 18% last year. But the mail-order option is still, relatively speaking, in its infancy. "We're concerned about anybody that is healthy competition," says David Bernauer, Walgreen's chief executive. Last fall, for example, a new United Auto Workers deal switched its 775,000 members to the mail option for long-term prescription drugs. A recent Hewitt & Associates poll of 648 companies showed that benefits experts at half were thinking of doing the same.
How did PBMs get so powerful? They started out in the 1970s doing claims adjudication for pharmacies and insurers, but moved into negotiating drug prices with manufacturers, designing health plans for employers and insurers and running mail-order shops. In the process, they set up retail networks--groups of pharmacies, including Walgreen, where patients can go to pick up something needed right away, like antibiotics.
More than half of mail order is controlled by three PBMs: Express Scripts, Medco Health Solutions and Caremark. With a combined revenue twice that of Walgreen, this troika realized they could milk more from the mails. Walgreen initially played along, partly because of its symbiosis with PBMs that okay one-time orders for drugstore pickup.
And for the past 20 years Walgreen has had its own mail-order business. While small, with only $1 billion in sales, it's growing at a faster rate than the chain overall. Walgreen also started its own PBM, Walgreens Health Initiatives, in 1995.
Here's the odd thing: Even though it has joined the PBM revolution, Walgreen is also fighting it. Gregory Wasson, president of Walgreens Health Initiatives, which includes his company's mail-order business, insists that you don't get any real bargain ordering by mail. "Those costs are pennies apart," he says, declining to spell out the numbers.
One study by economist Robert Maness and Loyola University law professor James Langenfeld--and paid for by pharmacies--supports Wasson. A single drug, the report says, may cost less by mail than it would in a store, but the average mail-order prescription is pricier. That's because PBMs steer consumers away from generics and toward more expensive brand-name drugs, for which they're rewarded by manufacturers. In a suit the Justice Department accuses Medco, among other things, of favoring drugs made by its former parent, Merck. PBMs are under legal assault from unions, states and retailers, with allegations ranging from overcharging to antitrust violations.
Walgreen says it's keeping store-dispensed drug costs low by using technicians (average hourly wage: $16, compared with $42 for a pharmacist) and technology that increases efficiency by telling pharmacists, for example, which prescriptions to fill first.
And what say the PBMs? Caremark points to a 2003 General Accounting Office report claiming that mail-order prices were 27% below retail for brand-name drugs and 53% less for generics. Walgreen's position is "foolish, it's absurd, and every employer and health plan in America knows that," says Mark Merritt, president of the Pharmaceutical Care Management Association, an industry group.
While grabbing the 90-day refills by persuading health insurers to offer patients bargains on the copays, the mail-order PBMs steer one-shot orders to stores. Walgreen's response: Offer to dispense 90 days of medicine at a reduced price under an option called "Advantage 90." Although the program is a modest success, it is noteworthy that Advantage 90 has taken business away not so much from mail-order operators as from other retail stores that don't have 90-day discounts.
Walgreen can't strong-arm the big PBMs. So it's trying to reach them obliquely. In December the company announced it would start blacklisting
customers whose health plans force them to use mail for long-term drugs but steer them to stores for the one-time drugs. That is, it will refuse to accept insurance cards as payments for one-time orders from these patients. Walgreen may not know for certain which plans are steering big orders to mail vendors, but says it will find out using internal sleuthing.
Alas, it's an idea that may backfire. Imagine going to a Walgreen to fill an emergency prescription for penicillin and being told that the pharmacy won't fill it. Bernauer is counting on customers to raise hell with their insurers, putting pressure on PBMs to include a retail option for 90-day drugs. More likely, irate shoppers will head off to another pharmacy that will take their insurance. Inexplicably, CVS has followed suit in giving these patients a hard time. The two companies say they are not acting in concert.
PBMs, says Bernauer, "really need us." Don't bet on it. Walgreen is nearly ubiquitous, but there are 50,000 other drugstores out there. Supermarket pharmacies are coming on strong, too. One PBM, which declines to have itself named, insists that it can survive without any relationship with Walgreen. "We have several substantial clients that don't have Walgreen in their network at all," says a spokesperson.
When all else fails, fall back on regulation. Walgreen has joined other retailers to support legislation in Michigan that would force PBMs to get rid of mail's cost advantage by forcing PBMs to offer plans a retail version of any 90-day bargain they offer by mail (see box).
Now the feds have come to the rescue. Medicare's first prescription drug benefit, created late last year for 40 million people, will make it optional--but not mandatory--for seniors to order drugs through the mail. The law also compels the Federal Trade Commission to investigate PBMs for potential abuses of their market power. It seems that 50,000 retailers have a little sway in the voting booth.
THIS ARTICLE COMES FROM FORBES MAGAZINE.
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