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A huge court settlement last summer that appeared to give retail pharmacists the chance to compete for employers' prescription dollars is stalled, but many druggists still are preparing to vie against pharmacy benefit managers and HMOs for drug contracts.

Some pharmacists felt vindicated last June when 11 large drug manufacturers agreed to pay about 32,000 pharmacies $351 million in connection with alleged past antitrust, price-fixing behavior (BI, June 17, 1996; May 13, 1996). U.S. District Court Judge Charles P. Kocoras in Chicago gave final approval June 21 to the settlement, which basically mirrored recommendations he made after rejecting an earlier proposal.

After the lengthy district court hearing, the manufacturers also consented to afford the pharmacists equal opportunity to compete for drug discounts that purchasers that use formularies to move drug market share-PBMs, health maintenance organizations, hospitals and nursing homes-commonly receive. At the time, some on the pharmacists' side had said changes in the U.S. drug market could happen in as little as three months as retailers finally entered the scene.

That turned out to be wishful, however, as legal complications have landed the case before the 7th U.S. Circuit Court of Appeals in Chicago. There it has languished, attorneys for the pharmacists complain.

"The case has sat and sat and sat," said David Melnick, a lead attorney in the pharmacists' class-action suit. "We're the proverbial ship dead in the water."

Since it was appealed, the appeals court has not scheduled briefings or oral arguments, and a silence has settled over the whole case, Mr. Melnick said. In the meantime, the druggists' newly won ability to compete for rebates from manufacturers hovers in limbo, and the cash settlement still is in a bank, undisbursed to the approximately 35,000 pharmacies in the class, he said.

The settlement was frozen solid due to complex legal appeals that came from pharmacists and manufacturers. The lack of action at the appeals level so far apparently has created an impasse between manufacturers and retail pharmacists.

"The manufacturers at this point may be as troubled as to what direction to go in as not," Mr. Melnick said.

The leading lobbying group for independent druggists, the Washington-based National Community Pharmacist Assn. (formerly the National Assn. of Retail Druggists) also has become impatient over the case, said John Rector, general counsel and senior vp of governmental affairs.

"A lot of folks are eager to go ahead and get a decision one way or another," Mr. Rector said. "It's certainly very frustrating to the typical pharmacist who is running the pharmacy."

Although the settlement is in a logjam, a group of pharmacists is organizing a recruiting effort to band pharmacists together in preparation to compete for drug manufacturers' discounts.

The Fort Worth, Texas-based Pharmacy Freedom Fund, which led the initial charge to sue drug companies three years ago, recently set up a subgroup, the Coalition of American Pharmacies. CAP is a non-profit corporation open to any pharmacy, said Bob Gude, president of the Pharmacy Freedom Fund and interim president of CAP.

Mr. Gude, a retired Fort Worth pharmacist, is attempting to sign up pharmacies independently or through affiliated pharmacy networks and wholesale buying groups and already has recruited about half the buying groups in the nation to affiliate with CAP, he said.

"With this, we'll be able to pool all our negotiating power together," he said. Mr. Gude said that next month he plans to mail out 28,000 invitations to both small independent and chain drugstores to join CAP.

In Mr. Gude's view, CAP will empower any drugstore to compete for a buyer's prescription drug business by giving them two things every PBM or HMO has: a drug formulary and detailed market information on drug sales.

CAP will develop its own drug formulary, supported by a pharmacy and therapeutics committee. Pharmacies then can attempt to get rebates from drug manufacturers for drugs listed on the CAP formulary.

In addition, the group plans to advise pharmacists how to modify their store computer software to keep track of market share and transmit the data to CAP's computer regularly. The information would be critical in negotiating rebates from drug manufacturers. Last year, Judge Kocoras, who presided over the pharmacists' hearing, ruled that pharmacies are entitled to the discounts for-profit managed care vendors get so long as the pharmacies can affect market share similarly.

According to literature the CAP is mailing the pharmacists, pharmacies can expect to start earning rebates six months after the end of the settlement.

But obstacles may stand in the way of the independent pharmacists' David defeat of the PBM Goliaths. A chief problem for the independents is that the size of leading PBMs gives employers wide access to a large array of retail locations, said Larry Boress, vp of the Chicago-based Midwest Business Group on Health.

"Any group of retail pharmacists is going to have to create a very large network, depending on the size of the community they live in," he said. A national employer wants a national PBM with extensive coverage in all regions, he said.

"The last thing an employer wants is to have to deal with more fragmentation in their health benefits," he said.

An executive of the nation's leading PBM agreed.

"In this business, volume and national scope are extreme advantages," said John Voris, vp of strategic alliances for Scottsdale, Ariz.-based PCS Health Systems. "They (the employer) want to deal with one vendor."

As for the pharmacists' agenda, Mr. Voris said, "We don't really see it as a significant threat," and he said PCS has not noticed any interest among employers in hiring pharmacists to replace PBMs. PCS has 56 million members and processes nearly a million claims a day.

Employers also are looking to PBMs to fill an emerging role as a data manager, Mr. Boress said. A good disease management program can research what types of drugs employees are using and why, he said, while a coalition of pharmacy buying groups-being quite new to the game-might be unable to move beyond drug market data.

But it may be the PBMs' size that gives them the decisive advantage over any newcomer to the market, no matter how well-intentioned, according to John Fortin, principal with A. Foster Higgins & Co. Inc. in Atlanta.

"These days, bigger is bigger and biggest is best," he said. "People who aren't aligning themselves with the big players are going to find themselves disadvantaged strategically. If there is still a mom-and-pop pharmacy out there, they're really trying to defy gravity."

Some druggists are willing to try to walk on walls. "I'll compete with anyone as long as the playing field is even," said Tony Welder, a pharmacist who owns three drug stores in the Bismarck, N.D., area. A pharmacist for 36 years, he is now secretary-treasurer of the National Community Pharmacist Assn. and dislikes mail-order PBM programs the most.

"I've seen a lot of pharmacists that are good, good-thinking, hard-working professionals (lose business)," he said. "I've seen some pharmacists work for 30 or 40 years and because of these programs in mail order, they can't sell their pharmacy."

Can those same pharmacists take on the PBMs?

"No doubt about it," Mr. Welder said.