PHARMACY'S ANSWER TO MERCK-MEDCO, PCS

Janice Zoeller

Check your mailbox. By now you should have received a solicitation to join Pharmacy Direct Network, recently formed by the National Association of Chain Drug Stores and open to all community pharmacies.

The new network was the subject of much informal discussion in San Francisco at the seventh-annual Supermarket Pharmacy Conference, sponsored by the Food Marketing Institute.

The big question on the minds of many supermarket pharmacy directors is how to sell membership in PDN to food store management. Such negotiation will surely test top management's support of pharmacy as well as management's understanding of what is at stake.

Here are some points you might want to cover in discussions with your management, based on what is known about PDN so far:

· PDN will be operated independently of NACDS. It will have its own officers, its own directors and its own office. See story on Page 4 for details on PDN and reactions to the formation of the network by supermarket pharmacy directors.

· It's better to join sooner rather than later. Membership fees of $300 per store will increase to $1,000 per store after July 31.

· Charter members (companies that join before July 31) may receive some or all of their membership fees back once PDN is up and running. However, there's no guarantee of such a payback.

· It's true that, unlike Super Net, this network doesn't yet have any contracts and there's no guarantee of the network's success. That said, it's clear that PDN and NACDS are prepared to make every effort and devote the needed resources to make this network succeed. The stakes are too high for anything less.

· PDN has learned from the experiences of others. This network is set up as a nonstock membership corporation, discouraging equity building and arguably giving it an advantage over competitors that must return value to shareholders. The company's independence should also minimize conflicts with NACDS or other associations.

· While there's likely to be some resistance to paying such membership fees to a group formed by the trade association of a rival format, the fact is that supermarket pharmacy already looks to NACDS for leadership on legislative, regulatory and other issues.

· The network offers an opportunity for pharmacy to show what it can do, especially through paying pharmacies incentives to increase generic utilization, provide case management, etc. This is what all of pharmacy has been clamoring for. This network also has the potential to develop a data base that could help show the real value that pharmacists bring to patient care.

· Probably most important for your business, PDN offers retail pharmacy a chance to take back control of the profession. For those of you who've had trouble explaining to your management recently why margins continue to shrink and why you have been practically powerless to prevent this, PDN offers the chance of breaking out of this chokehold.

· The cost of joining has to be weighed against the potential cost of not joining, which could be very high. Supermarket companies that don't join risk being left out of the network and the contracts it is able to secure.

One feeling proved dominant in San Francisco, and that's a perception that NACDS has the clout to take on PCS, Merck-Medco and now SmithKline Beecham-Diversified Pharmaceutical Services in the marketplace. Whether Pharmacy Direct Network can meet the low-price demands of third-party payers while also satisfying pharmacists' expectations of adequate reimbursement that recognizes the value of pharmacy remains to be seen. Many, though, seem willing to bet that a network controlled by pharmacy offers some hope for the future of retail pharmacy practice. As one pharmacy director put it, supermarket pharmacy directors will come to realize that the decision whether to join is a "no-brainer. There's really no choice," he said. "Supermarket pharmacies can't afford not to join." The challenge for supermarket pharmacy directors is to make the decision as obvious to management, and to do it soon.