Mail-Order Pharmacies Are Booming

Prescription drug sales are flourishing, but the boom is largely bypassing the corner drugstore in favor of mail-order pharmacies.

The move toward filling prescriptions for many chronic conditions through the mails provides another illustration of how big managed-care organizations are changing the ways that many Americans receive their health care. For example, Blue Cross/Blue Shield this year informed more than 600,000 federal retirees that the health insurer would no longer cover the entire cost of many prescription drugs purchased at drugstores.

Instead, Blue Cross gave its members a choice: To fill prescriptions for medicine used routinely for a chronic condition such as high cholesterol or asthma, they could visit a drugstore and shoulder 20 percent of the drug’s cost, or could order medications from a mail-order pharmacy and pay nothing.

“Mail order was a way of controlling our costs,” said Joe Orange of Blue Cross, which provides health insurance for 44 percent of all federal workers.

The U.S. market for mail-order pharmaceuticals increased 25.7 percent annually from 1990 to 1995, reaching $7.8 billion last year, according to FIND/SVP Inc., a New York research firm. Total sales of prescription drugs rose 12.2 percent a year for the same period, reaching $84.5 billion last year.

The market for mail-order prescription drugs is expected to continue to grow 20 percent a year, estimated Ken Abramowitz, a health care analyst at Sanford C. Bernstein & Co.

The trend is propelled, in part, by consumer convenience. But the recent surge stems primarily from employers pressuring insurers to trim health care costs, according to drug industry analysts and executives.

“Mail order makes sense for medications you take for months, years, maybe your whole life,” said Jeff Sanders, head of marketing and development for PCS Health Systems Inc., the nation’s second-largest prescription benefit management company. “Those kind of drugs are closely associated with aging. As the population ages, mail order, will increase in importance.”

More than 60 percent of prescription drug sales last year were for chronic conditions, Sanders estimated. Prescription benefit managers process the paperwork and manage the cost of employee plans that cover all or part of the cost of medications.

Providers of mail-order drugs use gigantic processing centers across the country that, automated with state-of-the-art computers, store information about each patient and dispense prescriptions based on that patient’s insurance coverage, medical needs and the frequency with which they tend to use a drug.

Cost savings, analysts say, come from bulk buying and bulk processing, which these centers perform more efficiently than many of the nation’s 55,000 drugstores. Also, insurers are more aggressively requesting that physicians in some cases switch prescriptions to less expensive generic brands or to similar - though slightly different - brandname counterparts - a process that’s easier to implement with mail-order pharmacies.

“With mail service, you have a large degree of control over a consumer’s choice of products,” said Robert N. Merold of IMS America Inc., a drug research and consulting firm. “By comparison, it’s a lot harder to control behavior in every doctor’s office or at any of the nation’s 55,000 drugstores.”

Some doctors have criticized this “switching strategy” employed by some mail-order pharmacies, saying it can lead to inappropriate substitutions that could cause adverse reactions.

“I think for the patient it makes getting drugs less expensive,” said Devra Marcus, an internist in Washington, D.C., since 1969. But, she said, it can be a nuisance writing prescriptions and then getting calls from a pharmaceutical firm asking to use a different drug.

Mail-order companies say they can often switch to a generic brand without calling a doctor, but that they must receive a doctor’s approval before switching to similar, but not identical, substitutes. Doing anything less, they say, could make them legally responsible if the substitute led to a bad reaction.

Some physicians, including Marcus, see another negative side effect from the mail-order pharmaceutical business: They say it’s putting local drugstores out of business. It’s a trend the National Association of Chain Drug Stores protests.

U.S. News & World Report and the Georgetown University School of Medicine fanned the debate, however, in August by releasing a study they say shows retail pharmacies “fail to protect consumers against potentially hazardous” drug interactions. Mail-order companies argue that, with their computer-driven dispensing centers, they are better able to monitor patients’ use of drugs and warn them of potentially bad combinations.