Retail pharmacy market structure and insurer-independent pharmacy bargaining in the Medicare Part D era.
OBJECTIVE
To examine whether local area pharmacy market structure influences contract terms between prescription drug plans (PDPs) and pharmacies under Part D.


METHODS
Data were collected and compiled from four sources: a national mail survey to independent pharmacies, National Councilfor Prescription Drug Programs (NCPDP) Pharmacy database, 2000 U.S. Census data, and 2006 Economic Census data.


RESULTS
Reimbursements varied substantially across pharmacies. Reimbursement for 20mg Lipitor (30 tablets) ranged from $62.40 to $154.80, and for 10mg Lisinopril (30 tablets), it ranged from $1.05 to $18. For brand-name drug Lipitor, local area pharmacy ownership concentration had a consistent positive effect on pharmacy bargaining power across model specifications (estimates between 0.084 and 0.097), while local area per capita income had a consistent negative effect on pharmacy bargaining power across specifications(-0.149 to -0.153). Few statistically significant relationships were found for generic drug Lisinopril.


CONCLUSIONS
Significant variation exists in PDP reimbursement and pharmacy bargaining power with PDPs. Pharmacy bargaining power is negatively related to the competition level and the income level in the area. These relationships are stronger for brand name than for generics. As contract offers tend to be non-negotiable, variation in reimbursements and pharmacy bargaining power reflect differences in initial insurer contract offerings. Such observations fit Rubinstein's subgame perfect equilibrium model.


CONCLUSIONS
Our results suggest pharmacies at the most risk of closing due to low reimbursements are in areas with many competing pharmacies. This implies that closures related to Part D changes will have limited effect on Medicare beneficiaries' access to pharmacies.
Xie
Yang
Y
College of Pharmacy, The University of Iowa, Iowa City, IA, USA.
Brooks
John M
JM
Urmie
Julie M
JM
Doucette
William R
WR
D003157:Community Pharmacy Services / Q000458:organization & administration*; D019992:Databases as Topic; D019538:Health Care Surveys; D006801:Humans; D054524:Medicare Part D; D008962:Models, Theoretical; D017008:Negotiating; D012051:Reimbursement Mechanisms / Q000458:organization & administration; D014481:United States