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Mail-Order Drug Sales May Increase In Coming Years

January 14, 1988

BOSTON (AP) _ Mail-order prescription drugs could shape that industry’s competitive landscape by the early 1990s, according to a private study, even though many consumers apparently are wary of buying their medicine by mail.

A report by the Cambridge consulting firm Arthur D. Little Inc., which conducted a study for a number of drug companies, indicates that lower prices and easy access will prompt consumers to turn increasingly to mail-order drugs in the coming years.

Mail-order drug sales could command $2.8 billion in sales by 1991, about 10 percent of the total U.S. drug market, compared with $1.2 billion last year and $100 million in 1981, the firm reported.

Marcia Codling, a consultant for Little, says consumer demand for cheaper and more accessible drugs will continue at least until 1991. By then, the report forecast, the U.S. drug industry will move into a variety of distribution methods as alternatives to the country’s current major pharmaceutical distributors - retailers and wholesalers.

Besides mail, those alternatives will include selling via cable television, dispensing by physicians and prescription credit cards. But the report says mail order will be most attractive to consumers.

″It will shape the basis of competition in the entire market,″ Codling said.

Because mail-order companies can provide volume purchasing, generic substitution for name brands and multi-month supplies, consumers would be able to obtain their drugs for less than at retail and wholesale outlets, said Skip Irving, another Little consultant.

But the report also determined that some consumers are uncomfortable with getting their drugs by mail. Concerns include prescription errors, tampering, theft and lack of interaction with a pharmacist, Irving said.

He said, for example, that eliminating the pharmacist from the process takes out a safety mechanism, and a source of information for consumers.

″On the other side, patient counseling in drug stores is really quite rare. Usually, you don’t see the pharmacist. You just pay your money, get your prescription and leave,″ Irving said.

Irving did not have statistics on the error rate in the mail-order drug industry but said the nation’s largest for-profit health care mail-order company, Medco Containment Services, had an error rate of less than 1 percent.

Most mail-order companies also ship drugs in insulated and unmarked packages, preventing theft or tampering, the report states.

Irving said mail-order drugs mostly would benefit elderly people who are ill, because many can not afford to pay as much for medicine and many have difficulty leaving their homes to make purchases. Elderly Americans consume about 30 percent of the nation’s prescribed drugs.

Organizations already participating in mail ordering are non-profit organizations such as the Veteran’s Administration and the American Association of Retired Persons. The two organizations dispensed about 28 million prescriptions in 1986, almost 75 percent of the mail-order drug market.

Health maintenance organizations and short-term emergency care centers are studying whether to make mail ordering a large piece of their business. Irving said such organizations view mail ordering as a cost-containment measure.

Chain drugstores such as Walgreens and J.C. Penney’s Thrift Drug Express Pharmacy Services also recently began providing mail-order services, Irving said.

Retail and wholesale pharmacies are not greatly threatened by the increase in mail order sales because ″there will always be some customers who don’t benefit from the convenience. They’re the people who are in drug stores on a regular basis or pick up their prescriptions when they go get groceries.″ Many people obtain their drugs through their HMOs, Irving said.

Still, more retailers and wholesalers, with up-to-date patient flow lists, are studying whether to move heavily into the mail-order market, Irving said.

The report indicated drugstores, which now represent about 80 percent of the U.S. drug-dispensing market, would account for only 60 percent of the market by 1995.

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