An Untold Cost Center in Pharmacy: Shipping. Yes, Shipping.
Our wacky health care system can’t pay pharmacies a few more dollars to survive, but we can spend billions of dollars on shipping costs.
Mail Order Pharmacy is a Significant Part of the US Prescription Dispensing Repertoire
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The latest data from IQVIA’s comprehensive report “The Use of Medicines in the U.S.” puts the number of mail-order prescriptions at 560 million as of 2020, with a roughly flat-to-downward trend line when considering the prior 3 years. Community-based pharmacies increased their numbers of fills over the same time period by 6% to 9%.1 Overall, mail order currently represents just under 10% of all prescription fills, roughly doubling from 1996 until 2005, then flatlining, and then trending slightly down since 2008.2 Interestingly, these trends are roughly inversely proportional to industry losses due to blockbuster drugs’ patent protection and the rise of cheap generics for chronic conditions over the same 25-year period.
"Local-By-Mail," Health Systems, and Alternative Closed-Door Pharmacies Increasingly Want the Public to Believe There is No Need for In-Person Community Pharmacy
One statistic not easily teased out by pharmacy claims data is the number of prescriptions that are mailed locally or by some retail pharmacies nationally. With manufacturers increasingly placing restrictions on the use of more than one contract pharmacy in the 340B program and emerging opportunities with shared savings in insurance captives, demonstration programs, and chances to provide focused care to at-risk populations, health systems and enterprising closed-door pharmacies are shipping prescriptions because most do not maintain a physical footprint in the neighborhoods and communities where their patients live. These pharmacies are not categorized as mail order and sometimes use couriers or other types of delivery means, but they rely on remote pharmacists only accessible by phone (if at all), often without offering in-person counseling or other related services in the community.
Community-Based Pharmacies Increasingly Deliver With Workforce Members
Independent pharmacies have been delivering medications to their patients for quite some time, particularly for at-risk or homebound patients, in a hyperlocal delivery model. The COVID-19 pandemic accelerated this trend as more individuals were confined indoors, and now chain pharmacies are starting to follow suit. All in all, there is no good data on how many prescriptions are delivered to patients, outside of the data available for formally classified mail-order pharmacies. However, it is likely a significant and growing portion of the whole.
The Cheaper the Medication, the Less Mail Order Makes Economic Sense
The net price of drugs (after rebates and concessions) has dropped over the past decade, driven by generic deflation.3 Generic prescriptions, now accounting for more than 90% of all prescription fills, are incredibly cheap in comparison with all other health care services, with Medicaid and Medicare together paying roughly $20 per generic fill and more than 75% of generic fills costing $10 or less.3
For any drugs on the discount list of most pharmacies, shipping and delivery costs can constitute a significant proportion of the total cost of putting the right drug, the right dose, and the right instructions into the hands of patients. Depending on the means, method, and packaging required when using mail or mail-like services (such as couriers), the cost could be $4 to $10 for most orders, and markedly more for special handling. If the average order (single filling event of 1 or more prescriptions) of medications is 2 to 3 prescriptions and the majority of medications dispensed are on discount drug lists, the proportion of total amount paid for a significant portion of orders could be between 25% and 50%.
That is astonishing when one thinks about open-door pharmacies struggling to stay open—that such a high proportion of such a high number of patient fills’ revenue could be directed to better care delivery in the community and to keeping highly accessible health care providers alive in those communities. Clearly, more analysis is needed to flesh out the proportion of dollars spent on shipping vs care delivery in the pharmacy-filling marketplace.
Community Pharmacies Remain Extraordinarily Inexpensive to the System
As I’ve laid out in prior Pharmacy Times letters, community pharmacies represent only 0.65% of the total cost of health care in the US when netting out the product from the gross margin between what the pharmacy bought the medication for and what it sold it for, plus dispensing fees and other services. In other words, 0.65% currently represents what it takes to keep community-based pharmacies open, with buildings, electricity, materials, labor, and other costs of maintaining a physical location. The fact that we as a country spend multiple billions of dollars to ship medications to patients instead of supporting locally provided services is a bit galling to anyone who has provided care to a patient in need, often for free, in a pharmacy.
You Received What in the Mail?!
Additionally, the issue of sending new drug products through the mail during heat waves is eye-opening. It was more than 110 °F in Phoenix, Arizona, for 31 days this past summer, and the rest of the country had similar records or near records broken for their respective geographies. Though small molecule, oral forms of medications might withstand those conditions, we are now seeing biologics, creams, and even vaccines being sent in the mail.
A colleague of mine called me recently and said, “You will never believe what just walked into my pharmacy. A mail order pharmacy sent one of my patients a herpes zoster vaccine with instructions to go to their doctor’s office and get it injected. The doctor’s office refused and sent the patient to us. Of course, we refused on 2 points: No. 1, there was no way to be guaranteed what was in that bottle regardless of the labeling, and No. 2, it was 96 degrees here in North Carolina today, and how do I know that ‘cold packaging’ was effective?"
Many Patients Still Need In-Person Access to Pharmacy Professionals
Many patients prefer to walk to their mailbox or their doorstep and receive their medications, particularly if they use 1 or 2 medications chronically and have uncomplicated health care circumstances (eg, oral contraceptives). But for patients who need interpersonal, in-person access to health care professionals and paraprofessionals, the community pharmacy remains a setting of care that deserves and needs to remain open. The community pharmacy is ultimately a better investment in health care services delivery than the postal system or delivery company.
About The Author
Troy Trygstad, PharmD, PhD, MBA, is the executive director of CPESN USA, a clinically integrated network of more than 3500 participating pharmacies. He received his PharmD and MBA degrees from Drake University and a PhD in pharmaceutical outcomes and policy from the University of North Carolina. He has recently served on the boar d of directors for the Pharmacy Quality Alliance and the American Pharmacists Association Foundation.
References
- The use of medicines in the U.S. May 27, 2021. Accessed September 25, 2023. https://www.iqvia.com/insights/the-iqvia-institute/reports/the-use-of-medicines-in-the-us
- Do D, Geldsetzer P. Trends in mail-order pharmacy use in the U.S. from 1996 to 2018: an analysis of the medical expenditure panel survey. Am J Prev Med. 2021;61(2):e63-e72. doi:10.1016/j.amepre.2021.02.017
- Congressional Budget Office. Prescription drugs: spending, use, and prices. January 2022. Accessed September 25, 2023. https://www.cbo.gov/publication/57772
