For the chain drug retailing sector, the next several years or more will be crucial, according to Steve Anderson, president and chief executive officer of the National Association of Chain Drug Stores.

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NACDS CEO: 'Absolutely critical' period begins

April 26th, 2012
Steve Anderson

ALEXANDRIA, Va. – For the chain drug retailing sector, the next several years or more will be crucial, according to Steve Anderson, president and chief executive officer of the National Association of Chain Drug Stores.

Anderson has turned NACDS into a focused, efficient and effective advocate for community pharmacy since becoming its chief five years ago. That's a good thing, since the association and the industry it represents now face some big issues with the potential to undercut chain drug financial prospects and, in turn, the trade's ability to meet patient needs for the expanding range of health care services and front-end products it provides.

"We've had a strategic plan every year for the last five years that has built on what we have done previously. Providing that focus has allowed us to be, in 2012, right at the center of the argument on all of these major health care issues," Anderson said.

"The next five to seven years — maybe the next two or three years — are going to be absolutely critical for our members, pharmacy and the chain drug store industry," he noted. "We have a unique opportunity to shape the debate in terms of public policy and the media and other aspects of what we do for the betterment of our patients and our members. As I've always said, associations are the nexus where business, politics and policy come together."

Anderson explains NACDS' strategic planning approach and discusses some of the chain drug industry's top issues — including the big merger of pharmacy benefit managers (PBMs) and pharmacy reimbursement — in an interview with Chain Drug Review. Here is an excerpt of the Q&A.

CDR: What does the strategic plan entail? What are the association’s objectives?

ANDERSON: We really do emphasize the legislative, regulatory and legal side of what we do. Probably even more important is the impact of the work we do on building the image of the industry so we can be successful, particularly on the legislative side of things, moving forward. And, once again, it’s not that we are making these activities up or inventing the image or creating it. We’re just basically telling the story of what our members are doing each and every day for the American people.

There was a perception when I came on here five years ago that we were kind of waiting around for the government to give us the green light to do things like MTM [medication therapy management] and focusing on medication adherence. But government at all levels is so dysfunctional right now that our members realized that if you’re waiting around for government to do something, you’re going to be waiting around for a long time. So our members have seized the initiative and become disruptive innovators in terms of health care. As patients become more empowered and we move toward patient-centered coordinated care models and other new aspects of how health care is going to be delivered, pharmacy is in a perfect place to be a primary deliverer of health care.

So our strategic planning process has worked well. We also do a good job playing the breaks. And we’ve hired some really great people in the last five years to augment the great people that we have here ­already.

We really operate this association more like a war room than like a trade association, and I think you’ve seen that in terms of what we’ve been doing on these PBM issues and some of the other things that we’re working on.

"Pharmacy is in a perfect place to be a primary deliverer of health care."

— Steve Anderson

CDR: You mentioned PBMs. If the Express Scripts-Medco deal is approved, it probably will make what you’re talking about much more difficult, if not impossible, for pharmacy to achieve.

ANDERSON: This is one of the more crucial issues that we’re facing. The merits of our case are strong: A merged company would have unprecedented clout in the pharmacy benefits market.

We deal with this issue like we’ve been dealing with other issues over the last five years. It’s a multipronged approach. We communicated aggressively with the Federal Trade Commission during its review of the merger. Two of four commissioners saw the need for remedies to mitigate the concerns surrounding the deal, and one of those commissioners wanted to challenge the merger in court, but the stalemate led to the FTC’s not taking action to block the merger. This will be an issue in flux up to the time that your readers hold this edition in their hands. We are communicating with over 30 state attorneys general who are also investigating the merger. The states are quite concerned about the impact of the merger on patient access to ­pharmacies.

We also are focused on the lawsuit filed by NACDS, NCPA and nine community pharmacy companies to challenge this merger.

Throughout, there also has been a strategy as it relates to Capitol Hill, and we’ve had more than 70 members of Congress who have weighed in with the FTC. We had very good hearings before the antitrust subcommittees of both the House and the Senate judiciary committees. At the Senate hearing, which was chaired by Sen. [Herb] Kohl [D., Wis.], so much information came out that continues to have legs. And we countered a lot of the arguments that Express Scripts and Medco made in that hearing.

Our multipronged approach also has included a major public relations effort, with ads in the Washington [D.C.] market to build support among people and encourage them to call their senators and ­representatives.

This whole situation has allowed us to explain a very complicated business model in terms of the impact that PBMs have on health care generally and pharmacies specifically, and the impact on patients. It’s given us the opportunity to communicate that, which will be helpful as we continue to work on other PBM issues, at both the federal and state levels. The particular areas of focus are mostly transparency and audits.

The situation has solidified the pharmacy industry, and we’ve worked very closely with NCPA [the National Community Pharmacists Association] on this, as we have on most of the major issues.

The fight is not over. NACDS and its allies will be engaged on these issues moving forward at the federal and state levels.

CDR: There seems to be a good deal of concern about this merger within the industry. Do you agree?

ANDERSON: We represent retail chain pharmacy, and it’s pretty clear where the board and leadership want us.

CDR: Talk a little bit more about your legislative efforts with regard to PBMs. You mentioned transparency. What specifically are you trying to achieve, and where do your efforts to convince Congress to take action stand?

ANDERSON: That’s another important aspect of this, because it gives us an opportunity to raise the pharmacy industry’s profile. It is reminiscent of the health care reform debate, which was an excellent vehicle for us to communicate the role the pharmacy plays in health care delivery.

The merger itself has allowed us to help key constituencies, mostly members of Congress, to really understand what PBMs are, because the business model is very opaque in terms of transparency and the audits that they put our members through. It’s very difficult for pharmacy operators, obviously, so we’re pretty much in lockstep on those issues moving forward.

Now the question is whether anything is going to get done in Washington this year. And, with the election cycle in full swing, the answer is there’s not much moving forward at all.

We are having success in the states. Utah, Kentucky and Indiana have passed bills, and the governors signed in Indiana and Utah. Signature is still pending in Kentucky. So there’s a lot going on at the state level. We’re pretty strong at the state level, when you remember that our members have hundreds of stores in each congressional and state legislative district.

CDR: Another important issue is the Centers for Medicare and Medicaid Services’ [CMS’] efforts to come up with a new definition of AMP [average manufacturer price], which could adversely affect remuneration for retail pharmacy.

ANDERSON: We’ve been very direct in our comments to CMS, both in the past and in relation to these draft FUL [federal upper limits] lists that they come out with. Together with NCPA, we sent a letter to CMS arguing that they shouldn’t do this until the AMP rule is finalized. It took CMS a long time to issue the proposed AMP rule this past February. But we analyzed it and, on April 2, submitted our comments supporting some aspects of it and questioning others, on legal and policy grounds.

One thing that we’ve already seen is there seems to be a lack of uniformity in terms of how the prices are both determined and reported by the drug manufacturers, and we’re seeing this pretty much across the board. We’ve always questioned whether AMP provides the proper method to do this. We sued CMS once under the Deficit Reduction Act over AMP, and we’ve looked at the AMP proposed rule really closely to see if CMS followed the current law as amended by health care reform and what the impact will be.

As for the proposed FULs, CMS seems to have missed the part that the FULs had to be no less than 175% of AMP. They came in right at 175%, and they could have gone higher. But there’s a lot there for us to chew on, and I think this will be going on for quite some time. And it took them almost two years to actually publish the rule after the health care reform act was enacted.

Once again, it’s rather disconcerting that they go off and start publishing draft FULs, which are having an adverse impact on our members. We think CMS should have followed a more orderly approach. But we are pleased, that the agency is attempting to link increases in dispensing fees.

CDR: But the feeling is that CMS will continue to issue the draft FUL lists, which will directly impact state Medicaid payments and could influence the private sector. 

ANDERSON: If past is prologue, yes.

CDR: If the final rule were bad for pharmacy, would NACDS then consider a resumption of legal action?

ANDERSON: Litigation is always an option. We sued CMS previously over AMP, and we’ve joined other groups in legal action related to Medicaid policy in states like California. For now, we have filed our comments on the proposed AMP rule and will have to see how CMS responds to those in a final AMP rule. Only upon publication of that final rule and assessment of its impact on pharmacies will NACDS be able to determine whether a legal challenge is necessary.

CDR: But publishing the draft FUL lists is hurting the industry.

ANDERSON: Yes. They could do damage if payers start to use them.

CDR: And you can’t ask the courts to stop that?

ANDERSON: Not over the lists, because they’re publishing them as proposed FULs. It would have to be based on the rule itself. If the proposed FULs were actually used for reimbursement, that would be a different story.

*To read the full interview with Steve Anderson, please see the State of the Industry report in the April 23, 2012, print issue of Chain Drug Review.