The real problem is that their business practices don’t necessarily align with their stated mission. Making a mission statement is not hard. But building a mission statement that is well thought out and defines a bonafide value strategy becomes a little bit tougher. The real problem is that without vigilant management practices the daily activities of the employees begin to drift from the stated mission of the business. If your customers visit your business expecting your mission to be accurate they will notice the dissonance. When what you say you are doing and what you are really doing is different you will lose customers. The only organizations that don’t follow this law are the government agencies that citizens are forced to use regardless of how poorly they do their job. As a pharmacist I have a hard time expelling some of the decisions agencies make. Here is an example of what I am talking about.
The following text in italics is a direct quote from the Federal trade Commission website at http://www.ftc.gov/ftc/about.shtm
To prevent business practices that are anticompetitive or deceptive or unfair to consumers; to enhance informed consumer choice and public understanding of the competitive process; and to accomplish this without unduly burdening legitimate business activity.
A U.S. economy characterized by vigorous competition among producers and consumer access to accurate information, yielding high-quality products at low prices and encouraging efficiency, innovation, and consumer choice.
Our Strategic Goals
- 1. Protect Consumers: Prevent fraud, deception, and unfair business practices in the marketplace.
- 2. Maintain Competition: Prevent anticompetitive mergers and other anticompetitive business practices in the marketplace.
With the mission, vision and goals listed above let me give you an imaginary scenario and then ask you a question. Here is the scenario.
Example of a Potentially Bad FTC decision
Imagine a world where every hardware store in America had to submit an electronic pre-authorization to purchase common items such as tools, lawn fertilizer, paint, patio furniture, appliances and barbeque supplies. This electronic authorization would involve collecting data from each customer such as their name, address, phone number and purchase intent. This data would have to be sent electronically to a subsidiary of Home Depot and they would mandate that the local store collect only 20% of the retail price from the customer and send a bill to Home Depot for the 80%. The 80% would be mailed by check to the local hardware store 45 days after the customer executed the transaction at the local hardware store. Home Depot would then negotiate deals with manufacturers to pay Home Depot a percentage of each sale these local hardware stores made. Home Depot would review this data transmission and then take several actions.
They could approve the purchase and then tell the local hardware store which brand of product to use, how much to charge the patient and then tell the local store to charge the patient only 20% of the stated price.
- Or, Home Depot could deny the transaction and tell the customer that they needed to call the customer service center. When the customer called the customer service center they could be told they could obtain the product only if they shop at Home Depot and be directed to the nearest Home Depot store.
- Or, Home Depot would simply collect all of the transaction data and build a giant database of purchase habits by location. They would then use this data to build a new Home Depot Store in a location where the most customers buy the most product. Local stores would essentially be sending the names and contact information for all of their loyal customers to their retail competitor to use to compete against them.
Comparing a hypothetical situation
To recap, assume that Home Depot has developed a subsidiary that manages data for all transactions made by all hardware suppliers. Here is the question, would the FTC think that Home Depot is now in an unfair market position? Would the practices of this data management company be likely to improve the chances that consumers experience a competitive marketplace or would they be more likely to improve Home Depot’s profitability at the expense of the local hardware store competition?
The Truth is Far Worse Than the Hypothetical
Well this nightmare imaginary scenario is exactly what the FTC has allowed to happen in the retail drug industry. The PBM-Drug Chain hybrid controls the cost, the access, the reimbursement levels and the drug use policies for the consumer and for their competitor stores. They have the ability to arbitrarily design strategies that drive sales to pharmacies in which they have an ownership interest without regard to the best interest of the patient. They pay their own subsidiaries at preferential rates and they create preferred networks to benefit their ancillary businesses.
Money Talks and Baloney Walks
There is an age old expression that, “Money Talks and Baloney Sandwiches (BS) walks.” Allowing middle men to control the market for their own personal gain is an abomination. The incestuous relationship between the large multi-site drug chains, mail order dispensaries and the pharmacy benefit managers can be called many things but none of these words should be used in polite company. And none of them are compliant with the stated mission of the FTC.
Once again the consumer loses
Independent drug store owners have always competed with each other and the chains for customers. They are not afraid of competition. They however deserve the opportunity to compete on level ground. They shouldn’t have to give their competition access to every transaction they perform and then allow these large companies to directly solicit their customers to use the big guys programs. They should not have to be silent, uncompensated salesman for their competitors.
My challenge to the FTC is this, do the right thing, follow your charter.