NACDS: BIGGEST CHALLENGE IS MANAGED CARE MARGINS

CAROL ANGRISANI

NEW YORK -- Maintaining managed care margins was one of the biggest challenges for chain drug stores in 1995, and it will continue to be an industry concern throughout the new year, according to David Maher, chairman of the National Association of Chain Drug Stores, Alexandria, Va.

Although Maher said managed care margins are declining, he said chain drug stores can compensate for the loss.

"We've got to bring new technology to the pharmacies in terms of improved productivity and efficiencies," Maher said at an NACDS year-end review press conference held here last month. Maher was joined by Ronald Ziegler, NACDS president and chief executive officer.

Maher noted that many NACDS members have worked to reduce the cost of labor. At the same time, he said, there has been a renewed focus on the front end, which has helped improve sales. For instance, chains have worked effectively to help keep health and beauty care sales from further eroding to mass merchants, Maher said.

Meanwhile, Ziegler said, chain drug stores have completed a "once-in-a-lifetime change" in the way prescriptions are paid.

In 1990, 63% of all prescriptions were paid for in cash, while 37% were paid for by third parties, including Medicaid, according to IMS America, Plymouth Meeting, Pa. In 1995, 61% of all prescriptions were paid for by third parties; 39% in cash.

"It's clear that the chain drug store has completed its once-in-a-lifetime change. Our paying customers have totally reversed in five years," Ziegler said.

Despite this shift, Ziegler is optimistic for 1996. "The chain drug store will end 1995 in a strong position," he said. Overall cumulative chain drug store sales at the end of 1995 were projected to reach $65 billion, an 8.5% increase over 1994, according to Ziegler. Additionally, pharmacy sales were expected to increase 15%, while front-end sales were projected to go up about 6.3%.

Over the next 10 years, spending for prescriptions is predicted to jump 110%, to $118 billion, Ziegler said.