Is There a Marketplace for Mail Order?

Author(s)Troy Trygstad, PharmD, PhD, MBA, Pharmacy Times Editor in Chief

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Key Takeaways

Mail-order pharmacy use is estimated at 10% to 15%, but broader definitions suggest higher prevalence, including home delivery.
Mail order's market share isn't dominant, but its financial impact is significant, especially with specialty medications.
Arkansas' law banning PBMs from owning pharmacies could reshape the industry, potentially benefiting health systems.
The future of mail-order pharmacy practice may involve diverse models, with the Arkansas law's influence on the industry still uncertain.

Arkansas' "shot heard round the pharmacy world": Preventing pharmacy benefit managers from owning pharmacies raises an interesting question for the field.

How Prevalent Is Mail Order Use? What About Home Delivery and Hand Delivery?

Current estimates of mail order use range from 10% to 15%, depending on the data source, sampling, and method of analysis.¹ However, defining or characterizing mail order beyond categorizing for contracting and licensing can actually be quite difficult, considering a broader definition of medication being delivered to a home address. Would a specialty pharmacy in the community that mails prescriptions using the Postal Service to patients within the state but beyond a delivery driver radius be considered mail order? Should a closed-door pharmacy focused on long-term care services delivering medications using a pharmacy workforce member be considered mail order or even home delivery? What about a central fill and shipping facility now becoming more popular within health systems to serve patients across multiple hospitals and clinics using mail-order methods? What about community-based pharmacies that deliver to the home with a workforce member (not using the postal service) but offering home delivery?

All told, the number of prescriptions filled in the United States for which a patient, caregiver, or agent takes possession at their residence vs at the filling pharmacy may be much larger than what’s reported for mail order in contemporary literature and reports.

Market Share vs Profitability: Follow the Money

The market share for a narrower definition of mail order is significant but not dominant in terms of percentage of prescriptions or market share of patronage. However, its share becomes much larger when considering its impact in terms of dollars. This is especially true when a broader definition of what is being dispensed includes much more expensive specialty medications, and a broader consideration of the type of delivery includes any means or method in which the patient, caregiver, or agent takes possession of the medication at their home residence.

Generic maintenance medications—taken at regular intervals, for long periods, and with consistent dosing—are best suited for mail-order or closed-door pharmacies that ship directly to the home. In contrast, newer brand-name and specialty medications often involve more complex handling, education, and clinical oversight, and they generate significantly more revenue and cost within the health care system. In short, it would be accurate to say that mail order does not maintain a dominant position, but it is inaccurate to say that mail order is not a big and profitable (for some) business, especially if you have procurement price advantages or you can set the reimbursement price to yourself at a different rate (ie, you are a pharmacy benefit manager [PBM]).

Community Pharmacy Is Struggling to Generate Margin, yet Mail Order and Home Delivery Are Seemingly Popular and More Sustainable

It’s no secret that community pharmacy (the retail class of trade) is at its low point of economic sustainability and getting worse every year. Although stock prices are up for insurers (inclusive of their in-house PBMs) and supply chain actors (wholesalers), publicly traded companies that are not vertically integrated on medications, such as Walgreens and Rite Aid, are closing or being foreclosed on, and CVS is underperforming specifically because of its pharmacy operations. Meanwhile, mail-order operations are a given with PBMs, and the broader world of home delivery continues to grow as profitable patients and buy-sell strategies continue to sift out from traditional community pharmacy practice and fulfillment.

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 board of directors for the Pharmacy Quality Alliance and the American Pharmacists Association Foundation. He also proudly practiced in community pharmacies across the state of North Carolina for 17 years.

What If All States Wanted to Go the Way of Arkansas? Who Besides PBMs Might Oppose It?

Arkansas recently passed a law that prevents PBMs from owning pharmacies. The idea is that the entity setting the reimbursement rate and most influencing the market coverage and channeling of patients should not be on the other side of the business. Unsurprisingly, this was not a popular idea within the PBM industry. Interestingly, it also got mixed reviews and considerations within health systems, which have grown their margin significantly through 340B capture and population health ventures, attempting to also capture as many prescriptions as possible from patients, who are more captive thanks to ancillary relationships (coverage by in-house PBMs and prescribers with health systems). Health systems most certainly are not fans of PBMs, continually doing battle over coverage, reimbursement, maintaining in-network status, and imposed sharing of 340B savings. Removing PBMs’ ability to become a dispenser should open up opportunities for health systems to grow their market share. Yet health systems also often have their own PBMs, and these types of emerging policy ideas and legislative language might be perceived differently, depending on the state, payer mix, and insurance operations of a particular health system.

Winners and Losers? It May Be Too Early to Tell (for Some)

If the Arkansas law proliferates to other states—as initial attempts are being considered across the US—PBMs will no longer be able to continue mail-order operations. Depending on how the policies evolve, this could also impact CVS’s community pharmacy operations. But what about health systems that do a lot of mailing and/ or community-based entities that may do so locally for practical reasons (such as in rural areas)? Meanwhile, more and more states are carving out managed care organizations and switching to a single PBM to administer on behalf of the state. If those PBMs are not allowed to engage in dispensing either through statute, the bidding process, or contracted language, it may offer an opportunity for non-PBM-owned pharmacies to provide alternative means of service-oriented, alternative prescription delivery.

What Is the Intrinsic Value of Mail-Order Pharmacy Practice?

Although the Arkansas legislation seems quite targeted at eliminating, or at least mitigating, “fox in the henhouse” opportunities for PBMs, the law raises some interesting thought experiments. Foremost among them: What is mail-order practice? What are emerging practice models that don’t involve patients, caregivers, or agents taking possession of medications from the dispensing pharmacy onsite? How are they defined, and what are the categories for both contracting and regulatory consideration? The going theory for mail-order advocates is strongly rooted in access and convenience, but what about care delivery, ensuring the medications work with each other, and getting patients to therapeutic goals? The PBM industry has promoted that mail-order practice accomplishes as much, but where is the care delivery? Very few patients who utilize mail order can speak of a single pharmacy workforce member with whom they’ve ever interacted.

Will Variations of Mail Order Emerge?

If PBMs are broadly banished from mail-order operations, will traditional mail-order businesses arise? Likely there will be many variations, ranging from less care in healthier populations to greater care in more complex populations, but with different operations and “tele-local” strategies with a distributed workforce that maintain central fulfillment operations but decentralized distribution and care delivery. Niche mail-order operations have already arrived in full force in the cash-pay marketplace, in which a PBM conflict in contracting is irrelevant.

Will We Ever Know? It Could Be Years Before This Law Spreads or Is Stopped by the Courts

We do not know at this point whether the Arkansas law will spread broadly, or at what pace it will spread, or whether it will be allowed to stand by the courts. Regardless, alternative sites of product fulfillment and product distribution to the patient, caregiver, or agent in the residence or other sites of care alongside billable services are likely to grow as patient need and demand for patient-centered care and coordination grow.