STOP & SHOP FIGHTING RHODE ISLAND PHARMACY CONTRACT

CHAPIN CLARK

QUINCY, Mass. -- Stop & Shop Cos. here has begun an ad and lobbying campaign to fight its pharmacies' exclusion from Rhode Island's largest health insurance networks.

A new prescription benefits contract enacted by Blue Cross & Blue Shield of Rhode Island and United Healthcare of New England does not include Stop & Shop's 17 Rhode Island stores on the plans' list of accepted pharmacies.

Stop & Shop, along with Walgreen Co., Deerfield, Ill., whose 15 Rhode Island stores also were excluded, has hired a Boston lobbying firm, McDermott/O'Neill & Associates, to help pass a freedom-of-choice law that would give retailers equal access to insurance plan members in Rhode Island. However, bills similar to the one proposed by Stop & Shop and Walgreen have failed in the Rhode Island legislature each of the last four years.

"We're guardedly optimistic; it's early in the process," Peter Phillipes, vice president and general counsel for Stop & Shop, told SN. "Other states have this legislation in place. They don't allow these kinds of restrictions, and the average prescription price is lower in these states. We think that says something about what's going on here."

Stop & Shop, a division of Atlanta-based Ahold USA, also ran protest ads in both The Providence Journal and The Call of Woonsocket (R.I.) late last month.

"We're going to run them as long as we think it's necessary," Phillipes said. He said the retailer is organizing a petition drive and hopes to get more signatures through the ads.

Stop & Shop and Walgreen contend their exclusion from the Blue Cross & Blue Shield and United Healthcare networks hurts Rhode Island consumers most of all, limiting plan members' choices.

The retailers have pledged to charge the same negotiated discount prices as the pharmacies already in the network, so, Stop & Shop and Walgreen say, their inclusion would only give consumers more options and added convenience.

At the heart of the conflict, however, is market share. Phillipes said that, as things stand, two-thirds of all Rhode Island pharmacy customers cannot get their prescriptions filled at Stop & Shop pharmacies. "The way we go to market is one-stop shopping. Obviously, this makes our pharmacies less valuable."

Network pharmacies, most notably Woonsocket-based CVS Corp., one of the state's largest employers, say they need to be guaranteed a certain level of volume to justify the lower prices they must charge plan members as a condition of the contract. Otherwise, retailers in the network say, it would simply be unprofitable for them to participate in the health plans.

Proponents of the current pharmacy benefits contract also argue that consumers already have ample choice. Blue Cross & Blue Shield's network, for example, comprises not only CVS but Brooks Pharmacy, Warwick, R.I., and 43 independents, accounting for 128 of the state's 175 pharmacies.

Influential state legislators seem to be in favor of allowing insurers to continue restricting their retail pharmacy networks. In a published report last month, William Irons, chairman of the Rhode Island Senate's Committee on Corporations, said, "I'm convinced that if we do anything legislatively, we'll accelerate the demise of these plans and there'll be no pharmacy benefit."

And, in the same report, state Rep. Brian Kennedy, who in the past had introduced freedom-of-choice bills to get network access for independent pharmacies, said, "My constituents are being adequately covered with the network available to them. As long as my independents are in there, I'm happy."