USPS Saturday cuts a Rx game-changer?

NEW YORK —Community pharmacy never really was able to stop the mail-order juggernaut. But the U.S. Postal Service, desperately short of operating funds and scrambling to cut billions of dollars from its overhead, may inadvertently slow it down.

The agency’s plan to scrap its Saturday delivery service for the first time in 147 years has drawn sharp opposition from managed care and mail-order pharmacy operators. They, along with online retailers, small-newspaper publishers and other groups, charge that a postal service cutback to weekday-only deliveries will drive up their operating costs as they shift Saturday shipments to UPS, FedEx or other alternative carriers. More importantly, they asserted, it would delay the movement of needed medicines to patients.

For retail pharmacies, though, an end to lower-cost weekend mail service by the federal government could be a potential game-changer. If the USPS follows through on its plan to curtail delivery service, it could arm neighborhood-based pharmacy retailers with another weapon in their long fight to recapture market share from their mail-driven competitors.

The reason is clear enough: If mail-order pharmacies have to pay more to get medicines to patients on weekends or on Monday morning, it will drive up costs for both the PBMs that own the mail centers and for the patients that rely on them. The result could be a gradual shift by some health plan payers and patients away from mail deliveries of their prescriptions and back to retail.

Among those leading the opposition are two pharmacy benefit management and mail-order giants, CVS Caremark and Medco Health Solutions. CVS Caremark alone shipped more than 50 million prescription orders, according to Ken Czarnecki, CVS SVP mail pharmacy operations, and most of that, he said, went by U.S. mail.

If the postal service follows through on its service cutback, Czarnecki said, CVS Caremark will have to turn to private delivery companies to get medicines to patients on the weekend. That will cost the prescription drug giant some $50 million a year, Czarnecki testified at a Postal Regulatory Commission hearing on June 22.

“Mail-order pharmacies and other merchants will have no choice but to shift these costs to patients,” Czarnecki told the commission. “Added costs not only impact patients’ pockets, but will also place significant fiscal strain on our healthcare system.”

The cost differences are clear enough. The USPS charges $5.15 for a guaranteed, two-day delivery of an 8-oz. package, for instance, from Atlanta to New York—roughly half of what some overnight carriers charge. In one 2008 study, Consumer Reports compared the costs of shipping a 5-lb. package—far heavier than that required for most prescription drug shipments—and found that the postal service charged $36.85 for next-day air delivery and $16.80 for two-day air, versus a charge of $73.50 for nextday and $43.65 for second-day delivery at both FedEx and UPS. Charges for drug shipments would be considerably lower in all cases, but the differences in rates between USPS and private carriers are clear.

Behind the government’s service-cutback proposal are big losses. Hammered by e-mail, social media and such overnight delivery companies as FedEx and UPS, the post office is hemorrhaging money, to the tune of as much as $7 billion in 2010. But cutting weekend deliveries will hurt whole sectors of the U.S. economy, opponents of the plan asserted.

It isn’t just mail-order pharmacies that are crying foul. Newspaper publishers and Internet-based and catalog shippers, as well as other industries, also are raising alarms about the higher costs.

Prescription drug shippers, which dispense 1-in-5 scripts, may have the most compelling argument against the postal agency’s weekday-only proposal, however. It’s crucial that patients get timely delivery of their medicines, and for some homebound patients, there may be limited alternatives for easy access to those meds. Many Americans also like the savings that often go along with what they see as a convenience in getting chronic-care medicines shipped to their homes.

Both houses of Congress are looking into the postal service’s proposal. On June 23, the House Subcommittee on Federal Workforce, Postal Service and the District of Columbia met with the Senate Subcommittee on Federal Management, Government Information, Federal Service and International Security in a joint hearing to discuss the plan for a five-day mail week, and industry groups affected by the plan were quick to weigh in.

“About 1-in-6 prescriptions that are home-delivered arrive on Saturday,” noted Pharmaceutical Care Management Association president and CEO Mark Merritt in remarks aimed at lawmakers. “Consumers count on getting their prescriptions at the right time and shouldn’t be made to wait two—or in the case of federal holidays that fall on a Monday, three—days.”

What’s more, Merritt pointed out, “Surveys show that recipients of prescription drugs by mail—a majority of which are delivered by the USPS—are highly satisfied with mail-service pharmacies, as they are convenient, safe and save consumers money. Peer-reviewed research has demonstrated that home delivery of prescription medications can increase adherence to drug regimens for the chronically ill, such as those with diabetes.”