Small pharmacies concerned about drug bill

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Independent pharmacist John Hoeschen is concerned that if Target and Wal-Mart are allowed to sell prescription drugs at lower prices, his business will be hurt.
MPR Photo/Tom Scheck

The law in question forbids retailers from pricing a product below their own cost. The law was enacted so businesses couldn't drive out competitors by setting prices so low they lose money on their sales. But Wal-Mart and Target say that law prevents them from fully implementing their new $4 prescription drug programs in Minnesota.

"We really want to offer the same opportunities for Minnesotans that they have in other states," says Julie Idelkope, with Wal-Mart.

Idelkope says Wal-Mart sells about 50 more drugs for $4 in states that don't have so-called predatory pricing laws. Idelkope says Wal-Mart would like to see the Minnesota law changed so the retailer can price all the drugs in the program at $4.

Wal-Mart representative
Julie Idelkope represents Wal-Mart.
MPR Photo/Tom Scheck

"We want to do what we do best," Idelkope says, "which is driving the cost out of the system and we found a real way to do that and that's with the $4 drugs."

Officials with Minneapolis-based Target Corporation did not return repeated calls for this report.

Several state lawmakers want to exempt all generic and brand name drugs from the predatory pricing law. Rep. Joe Atkins, DFL-Inver Grove Heights, says he's pushing the bill because medications are different from other products. He says medicine can improve health and save lives.

"I don't think I have ever introduced a bill that has been so well received," Atkins says. "I've gotten several hundred phone calls, e-mails, letters from people saying we need to make $4 drugs available."

Rep. Joe Atkins
Rep. Joe Atkins, DFL-Inver Grove Heights.
MPR Photo/Tom Scheck

Atkins says the bill would allow the exemption as long as two retailers are selling a drug at about the same price. He says he's changed the bill so the exemption will last only one year and will affect only the seven county metropolitan area, Rochester, St. Cloud and Duluth. Atkins says he hopes the one-year time period will allow lawmakers to make adjustments if the law puts any pharmacies out of business.

Still the proposal doesn't sit well with the Minnesota Pharmacists Association and its members.

St. Paul Corner Drug is one of those old time drug stores. There's a six stool soda fountain right near the front door. The pharmacy counter is in the back. That's where owner John Hoeschen is busy processing orders.

Hoeschen says a recent state study found that it costs $9.59 to dispense a prescription. He says larger retailers can afford the $4 prescription plans because they can make up their lost profits on other goods.

John Hoeschen
John Hoeschen owns St. Paul Corner Drug.
MPR Photo/Tom Scheck

"They've taken it and condensed it down to a product in a bottle," Hoeschen said. "And if that's all pharmacy services are then I'm way overpriced."

Hoeschen says a large part of his job also includes guarding against adverse drug interactions and counseling patients.

If the law is changed, Hoeschen says some of his customers will start expecting him to sell drugs below his cost. He and other independent pharmacies worry their economic lives could be at stake if larger retailers are allowed to sell below cost.

"Ninety percent of our money comes from delivering health care services through a retail community pharmacy," Hoeschen says. "Under that business arrangement or setup, there's no way I can produce a $4 prescription."

Several pharmacy experts say there are other potential problems. University of Minnesota pharmacy professor Stephen Schondelmeyer says the generic drugs in the $4 plans only account for 2 percent of total prescriptions. He says the sticker shock comes from the brand name medicine that isn't included in these plans.

Schondelmeyer also says the $4 plans could have the unintended effect of driving up the price of drugs in the long run.

"As generic manufacturers have more pressure to lower their price and their margins get thinner, fewer companies are going to enter the market for generics," Schondelmeyer says. "As you have fewer companies in the market for generics, you'll see the generic prices actually go up."

Former Attorney General Mike Hatch said in December that he didn't think a law change was necessary. He said retailers were free to sell the drugs below cost. His successor, Lori Swanson, has not taken a position on the bill.