MHCC Finds Maryland Lags in Use of Mail-Service Pharmacies Because of Retail Pharmacy Protections

(Washington, DC)—With Maryland lagging the nation in its use of lower-cost mail-service pharmacies because of state laws protecting old-style drugstores from more competition, a new report prepared by the Maryland Health Care Commission and the Maryland Insurance Administration suggests that some Maryland consumers and employers could see their prescription drug costs reduced by $10 million to as much as $32 million annually if the state’s anti-mail service pharmacy laws were changed, the Pharmaceutical Care Management Association (PCMA) said today. PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which administer prescription drug plans for more than 200 million Americans with health coverage provided through large and small businesses, health insurers, labor unions, and Medicare.

“For anyone interested in common-sense approaches to lowering Maryland’s prescription drug tab, this report should be a wake-up call. Changing state law to expand access to mail-service pharmacies would mean lower prescription drug costs for Maryland consumers and businesses,” said PCMA President Mark Merritt. “Mail-service pharmacies typically offer consumers and purchasers an additional 10-percent savings compared to retail pharmacies, 24-hour access to pharmacists, and more privacy and convenience. Regrettably, current law protects Maryland’s drugstores from more competition and consumers and employers are paying more for prescription drugs as a result.”

The new report, “Mail-Order Purchase of Maintenance Drugs: Impact on Consumers, Payers, and Retail Pharmacies,” was mandated in 2005 by Maryland SB 885. The law required the Maryland Health Care Commission (MHCC) and the Maryland Insurance Administration, in consultation with the Maryland Board of Pharmacy, to study how the use of increased mail-service pharmacy would impact consumers and retail pharmacies. Importantly, the report only examined the effect improved access to mail-service pharmacies would have on consumers with coverage through fully-insured plans that are regulated by the state of Maryland. Prescription drug spending through fully-insured plans represents about one-fourth of total prescription drug spending in Maryland. Most insured Marylanders are in health plans that are self-insured and governed by a separate federal law, the Employee Income Retirement Security Act (ERISA).

Among the report’s key findings:

Maryland lags the nation in its use of mail-service pharmacies because of retail pharmacy protections. In Maryland, about 14 percent of prescription drug spending ($600 million) is spent through mail-service pharmacies. Nationally, the share is over 18 percent. According to the report, a key reason that Maryland lags the nation in use of mail-service pharmacies is that “retail pharmacy protections have contributed to a lower use of mail-order in Maryland.” Maryland law currently prohibits a third-party payer from charging consumers lower copayments for mail-service pharmacies than for retail pharmacies â?? even though other data find that the mail-service pharmacy option is typically 10 percent more cost effective than retail pharmacies.

If Maryland consumers used mail-service pharmacies at a rate comparable to national trends, Maryland consumers in state-regulated, fully-insured plans could save $7 million to $16 million annually on prescription drug costs. The MHCC conducted simulations to estimate the impact of increased mail-service pharmacy on consumers with coverage through state-regulated, fully-insured plans. The MHCC estimates that these consumers could see out-of-pocket prescription drug costs reduced by 2 to 6 percent through increased use of mail-service pharmacies. The cost savings are attributed to reduced copayments.

If Maryland’s third-party payers and carriers were able to take better advantage of mail-service pharmacies, the MHCC finds that employers and health plans would realize an additional discount of 5 to 10 percent on prescription-drug costs.

More mail-service pharmacy use by Maryland consumers and employers would reduce revenue to retail pharmacies in a range of 1 to 3 percent, but could be substantially dampened by the overall growth in prescription drug sales. The report estimates that supermarkets and mass retailers such as Wal-Mart would be most affected by increased mail-service pharmacy use in Maryland. Independent pharmacies would be less impacted because consumers are more likely to fill maintenance drugs at mass retailers and supermarkets. The report’s authors also note that “it should be emphasized that the financial impact on retail pharmacies described here will be dampened and possibly substantially so, by the overall growth in sales of prescription drugs.”

A complete copy of the report can be found at: http://mhcc.maryland.gov/legislative/mailorderrpt.pdf

The Pharmaceutical Care Management Association (PCMA) is the national trade association representing America’s pharmacy benefit managers (PBMs). PCMA member companies provide pharmaceutical care management services to more than 200 million Americans.