Forbes Magazine Entitled, \"In the Pill Box\"

¶ … Forbes Magazine entitled, "In the Pill Box" discusses Walgreen's Drugstore and the challenge that it faces from Pharmacy Benefit Managers (PBM). The article begins by informing the reader of the astronomical growth of the Walgreen's company. The author explains that the company's stock has risen by 3,000% in the past 20 years and that the store plans to have over 7,000 stores by 2010. (Lambert) The article also asserts that the same-store sales increased by 9% in fiscal 2003. (Lambert)

The author contends that although the company is extremely success, there is a threat on the horizon. This threat comes in the form of Pharmacy Benefit Managers who show health organizations and employers how to make prescriptions drugs more cost effective. The article explains that PBM's often encourage these organizations to persuade patients to get long-term prescriptions through the mail instead of going to a pharmacy. Mail order pharmaceuticals are becoming more and more popular with consumers. However Walgreen's fears that this practice will begin to affect their pharmaceutical sales which accounted for 62% of the company's revenues in 2003. (Lambert) Walgreen's fears that if the trend continues their business strategy could be greatly compromised.

The article contends that the power that PBM's have stems from the relationships that they have built over the years with various health organizations and employers. These relationships started in the 1970's as the PBM's would perform claims adjudication for insurers and pharmacies. Overtime the PBM's started to perform other tasks such as; negotiating drug prices, devising health plans for employers and insurers and operating mail-order stores. (Lambert) They were also responsible for setting up groups of pharmacies (networks). (Lambert)

Although Walgreen's is firmly against mail order prescriptions, the company actually started a PBM in 1995 called Walgreen's Health Initiative. (Lambert) This initiative was created in an effort to combat some of the ill effects that Walgreen's felt would develop if Walgreen's didn't create their own PBM. Although this segment of the company's business only accounts for a small percentage of overall revenues, the mail order segment of the company is growing faster than any other sector. (Lambert)

The article explains that many PBM's have been successful at persuading their clients that mail order is less costly than filling prescription in the traditional way. However, Walgreen's has pointed to a study performed by the economist Robert Maness and law professor James Langenfeld, which found that ordering prescriptions by mail is more expensive than going to the pharmacy. (Lambert) Still others argue that receiving prescriptions by mail is more cost effective for customers.

Finally, the article explains that Walgreen's and other drug stores have decided to take a firm stand against PBM's and mail order prescriptions. The article asserts that Walgreen's is now "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 to accept insurance cards as payments for one-time orders from these patients."(Lambert)

Opposing Views/Opinion

The issue of PBM's and mail order prescription is certain to be an issue for years to some. The drugstores and pharmacies fear that the mail order prescription business will be detrimental to their survival. They seem to believe that PBM's are only on the side of the drug company and that they are lying to consumers. The drugstores believe that mail order prescriptions are not cost effective while the PBM's argue that consumers can save up to 27% if they order their prescriptions through the mail

At the other end of the debate there are consumers who like to order their prescriptions through the mail. Some consumers do this even if it is not mandated by their insurance providers. In many cases consumers just find it more convenient to order prescriptions through the mail. In any case, the PBM's and the drugstores will continue to quarrel over which method is less expensive.