SUIT ON PRICE DIFERENTIAL IS LAUDED

MICHAEL SLEZAK

CINCINNATI -- Supermarket pharmacists are hopeful that a lawsuit filed here on Feb. 14 by four of the nation's largest food retailers will eventually strip competing classes of trade of their price advantages on brand- name prescription drugs.

Kroger Co., Cincinnati; Albertson's, Boise, Idaho; Safeway, Oakland, Calif., and Vons Cos., Arcadia, Calif., filed their suit in Federal District Court against 16 pharmaceutical manufacturers and a large mail-order pharmacy, Medco Containment Services, Montvale, N.J., alleging unfair price discrimination.

The supermarkets' suit contends that the drug companies sell their products to mail-order pharmacies, health maintenance organizations and hospital pharmacies at substantially lower prices than they charge the supermarket pharmacies for similar quantities purchased. The supermarkets say these practices violate the Robinson-Patman Act, and their suit seeks to end the pricing practices and recover past damages.

"A favorable ruling of this suit would be positive for all of pharmacy," said Barrett Moravec, director of pharmacy at Abco Markets, Phoenix. "There's a strong message going out to the [pharmaceutical] manufacturers," said Terry Cater, director of pharmacy for Save Mart Supermarkets, Modesto, Calif. "I think it's great news that companies representing our industry have stepped up to the plate. These companies are the leaders."

"I wish them luck," added Russell Fair, vice president of pharmacy operations for Giant Food, Landover, Md.

The supermarket companies are confident they can win. "What's been done here is illegal," said Richard Arnold, attorney with Kenny Nachwalter Seymour Arnold Chritchlow & Spector, Miami, which represents the supermarkets. "We believe this lawsuit to be a viable, winnable lawsuit."

The suit by the supermarkets follows the filing of several other major lawsuits, one spearheaded by Rite Aid and Revco, filed Oct. 14, and five initiated by the Pharmacy Defense Fund of Corte Madera, Calif., on Aug. 4.

The first court dates are for suits brought by the Pharmacy Defense Fund on May 30 and June 13. Unlike the supermarket and Rite Aid suits, which were filed under the Robinson-Patman Act, the Pharmacy Defense Fund suits rely on California antitrust statutes, and allege price-fixing and collusive arrangements between drug manufacturers and wholesalers as well as illegal differential pricing.

While news of this latest suit has been welcomed by supermarket pharmacists, even winning the case may not be enough to materially change the purchasing environment, according to one pharmacist-attorney, who is not involved in these lawsuits.

"I don't know what a victory is for pharmacy," said Robert Kamm, president of the American Society for Pharmacy Law. "Even if the supermarkets win the suit, I don't think they'll achieve their goal of standardized pricing, because the law allows differential pricing among different classes of trade.

"Short of a change of the Robinson-Patman Act itself, a win in the suit is just going to say that certain prices were illegally discriminatory. That doesn't mean all price differentials are illegal," said Kamm. "This is not going to cause mail-order pharmacies to go out of business. And it won't get rid of HMOs.

"Retail pharmacists may be well advised to focus on legislative changes," said Kamm. "That may be the real victory, to have the necessary legislative changes made."

The manufacturers named in the suit are Abbott Laboratories, Abbott Park, Ill.; American Home Products Corp., Madison, N.J.; Bristol Myers-Squibb Co., New York; Burroughs-Wellcome Co., Research Triangle Park, N.C.; Ciba-Geigy Corp., Summit, N.J.; Du Pont-Merck Pharmaceutical Co., Wilmington, Del.; Glaxo Inc., Research Triangle Park, N.C.; Eli Lilly & Co., Indianapolis; Merck & Co., Whitehouse Station, N.J.; Pfizer Inc., New York; Rhone-Poulenc Rorer, Collegeville, Pa.; Schering-Plough Corp., Madison, N.J.; G.D. Searle & Co., Skokie, Ill.; SmithKline Beecham Pharmaceuticals Co., Philadelphia; Upjohn Co., Kalamazoo, Mich., and Zeneca Pharmaceuticals Group, Wilmington, Del.

Several drug manufacturers named said their pricing structures are legal and follow standard business practices.

"The practice of offering different prices to different classes of customers is actually common, and not just in our industry, it's in American business in general," said Nancy Pekarek, manager of media relations for Glaxo.

A spokesman for Ciba-Geigy Corp., Summit, N.J., said the suit was "without merit." Spokesmen for Zeneca and Burroughs-Wellcome said they also felt their companies' pricing structures were fully within the law.

Kamm said supermarket pharmacies have their best case against manufacturers in their dealings with mail-order companies; but even that case could be difficult to win. He said it may be "several years before this gets wrapped up."

Glaxo's Pekarek added that the manufacturers named in the suit are merely keeping pace with the changing medical industry. "This practice of offering different prices to different customers appears to be consistent with the movement towards managed care and cost containment," she said.

Moravec said he is hopeful this case will, at the very least, help to correct misconceptions about retail pharmacy prices, and that consumers may begin to understand the basis for the vast price differences between retail and mail-order pharmacies. It is difficult to explain to senior citizens, he said, that they actually pay less for drugs obtained through a mail-order pharmacy than it costs the supermarket to purchase them.

"I think mail-order would be a non-issue if the playing field was leveled," said Moravec.

Cater agreed. "If mail-order pharmacy didn't have the pricing advantage, in essence it would have no advantage at all."

If the supermarkets do win the case, some retailers feel that a new era of pharmacy, and of health care cost and efficiency, could evolve.

"Then, since we'd all have access to the same pricing structures, competition would be based not only on price but also on service to the customer," said Moravec. "Service levels would become competitive and consumers would benefit."