COUNCIL OF THE CITY OF PHILADELPHIA JOINT PUBLIC HEARING BEFORE THE COUNCIL COMMITTEES ON COMMERCE & ECONOMIC DEVELOPMENT AND LAW & GOVERNMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 21, 1998 11:18 a.m. - - - Resolution No. 970845 - Authorizing Committee on Commerce and Economic Development to hold hearings investigating the provisions of contract between the City of Philadelphia and the Rite Aid Corporation on the prescription drug plan for all City employees. Resolution No. 970850 - Authorizing Council's Committee on Law and Government to conduct a full and comprehensive investigation of the City's health insurance plans offered to non-represented and fair-share employees and elected officials for the 1998 calendar year. PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chairman COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN HAPPY FERNANDEZ COUNCILWOMAN MARIAN B. TASCO COUNCILMAN FRANK DICICCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN RICHARD T. MARIANO COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 I N D E X Bill No. 970845 David Volpe . . . . . . . . . . . . . . . . . First Deputy City Controller of Philadelphia 6 Linda Volpe, Personnel Director . . . . . . . 31 City of Philadelphia Elliot Gurson, Senior Vice President, . . . . 88 General Counsel, Secretary, Rite Aid Corporation Edward Hushen, Regional Market Manager. . . . 109 Rite Aid Corporation Sam Brog, Independent Pharmacist, . . . . . . 174 Exec. Dir., Philadelphia Assoc. Retail Druggists Frances Gallagher, M.S. Patient . . . . . . . 213 Clerk Typist II - City of Philadelphia 3 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Good morning, ladies and gentlemen. This is a joint hearing of the Committees on Commerce and Economic Development, and Law and Government. I'm Councilman Nutter, Chair of the Commerce and Economic Development Committee. We're anticipating Councilman Cohen, Chair of the Law and Government Committee shortly. To my left is committee member Councilwoman Blackwell. And on the other side of the room is Councilman Ortiz. We're going to start today's hearings on Resolution No. 970845. Resolution 980152 will be held today, and we may also take testimony on Resolution 970850. What we'll do is ask the clerk of the Commerce and Economic Development Committee to read the titles of both resolutions that we're going to hear today.
Resolution No. 970845, a resolution Authorizing Committee on Commerce and Economic Development to hold hearings investigating the provisions of contract between the City of Philadelphia and the Rite Aid Corporation on the prescription drug plan for all 4 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 City employees, including but not limited to: copayment fees per prescription and any terms relating to allowable increases in these copayment fees; contract requirements related to customer service standards and customer complaint resolution procedures; and all contract terms, conditions and renewal provisions; and investigating the lack of information provided to City employees about changes made in fees, services, and contract terms, including but not limited to: copayment fees per prescription and any terms relating to allowable increases in these copayment fees; contract requirements related to customer service standards and customer complaint resolution procedures; and all contract terms, conditions and renewal provisions; and investigating the lack of information provided to City employees about changes made in fees, services, and contract terms. And Resolution No. 970850, authorizing Council's Committee on Law and Government to conduct a full and comprehensive investigation of the City's health insurance plans offered to non-represented and fair-share employees and 5 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 elected officials for the 1998 calendar year; particularly with regard to the increases that will be imposed in the 1998 plans and a variety of copay deductible and co-insurance fees over the equivalent fees contained in the 1997 plans; and with respect to widespread allegations that have been made regarding interference by managed-care providers in general and Aetna U.S. Health Care in particular with the doctor-patient relationship as it affects both members of the general public and City officials and employees; and authorizing the Committee, in furtherance of such investigation, to issue such subpoenas as may be necessary to compel the attendance of witnesses and the production of documents to the full authorized under Section 2-401 of the Home Rule Charter..
Thank you very much. Our first witness for Resolution 970845 is Mr. David Volpe Deputy City Controller. Mr. Volpe, please come to the table. (David Volpe comes forward.)
Mr. Volpe, please identify yourself for the record, and you can 6 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 begin your testimony.
Thank you, Mr. Chairman and members of the committee. My name is David Volpe. I'm the First Deputy City Controller of Philadelphia. And I'm here today in my capacity as Trustee on the Board of Pensions and Retirement, serving on behalf of the Controller, to provide testimony on Resolution No. 970845 regarding the contract between Rite Aid Corporation and the City of Philadelphia and the relationship between the City of Philadelphia and certain pension members. Two specifics issues related to --
Mr. Volpe, hold on. I'm sorry to interrupt you. We're having some kind of mechanical problem. I'm having difficulty hearing you. Why don't you bring the microphone a little closer, and we'll try to do --
Again, I'm here today to talk about the contract between the Rite Aid 7 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Corporation and the City of Philadelphia, and the relationship between the City of Philadelphia and selected pension groups. Two specifics issuing related to Rite Aid's prescription coverage for selected groups of pensioners are of particular concern to me. These relate to: (1) the high cost of prescription coverage for pensioners no longer covered under the City-paid benefit plans; and (2) the inability of these pensioners to opt out of the Rite Aid prescription coverage and still receive health coverage from the City. Retirees receiving prescription plan coverage through the City fall into two groups: The first group is comprised of former employees retired less than four years. The City pays the full cost of health care and prescription plan coverage for this group of retirees. On the prescription side, the City pays a composite fee of $65 per month per family to Rite Aid to purchase a prescription plan. The second group is made up of former employees retired four years or more. These retirees are left on their own when it comes to 8 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 securing and paying for health and prescription coverage. There are currently 564 pensioners paying the retirement system; and, hence, the City, for post-retirement health and prescription coverage. Because these former employees have been retired four years or more, they are no 9 longer eligible for City-paid coverage. I will refer to these former employees as "post-City-credit retirees" as I go on. The post-City-credit retirees face a daunting challenge: find and pay for affordable yet comprehensive health and prescription coverage. Unfortunately, the City does not do many favors for these employees when it comes to offering affordable prescription plan coverage. I noted earlier that the City pays a composite fee of $65 per family per month to cover the cost of prescription coverage for employees retired less than four years. The cost to retirees is nothing. 96 per person -- that's per person per month. This means that a post-City-credit husband and 9 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 wife will pay virtually double what the City pays with no added benefit. For a pensioner with a wife and a dependent child. The cost could be three or even four times what the City pays the day after the four-year City-covered period ends. And it is not like these pensioners get that much for their dollar. Coverage is capped at $1500 per person per year, which is an increase from what it used to be. Three years ago, the Rite Aid plan limit was $800 per person, meaning that some families were paying in more than what they were receiving in terms of prescription coverage. And, as I note, that has changed. The other problem with the health plan offered our hundreds of post-City-credit pensioners is that these folks cannot drop out of the Rite Aid prescription plan and keep one of the City-offered health-care plans. Under the present system, the employee obtains health care through the City, he or she must pay for the prescription benefit from Rite Aid. This impact impacts retirees aged $65 and older the worst. These individuals, many of 10 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 whom rely exclusively on their City pensions and Social Security for income, could opt for a Medicare supplement with either of the City-offered HMOs which offers a prescription benefit of $1500 per person at little or no cost. However, under the present arrangement with Rite Aid, the pensioners cannot drop the Rite Aid prescription plan without also losing their health-care coverage. To me, this seems like a patently unfair way to be treating our retirees. These are people of limited means paying on their own for the cost of their health and prescription coverage. To remedy this situation, we need to do two things at a minimum.
First, negotiate a more equitable for post-City-credit retirees with Rite Aid. It doesn't seem fair to have the City pay a composite rate of $65 per family to Rite Aid one year and then make pensioners pay double this amount the next year. And it cannot cost Rite Aid that much, especially when the $1500 coverage cap is considered. Second, we need to allow employees to opt out of the Rite Aid prescription plan when 11 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 selecting coverage. Nothing I am recommending should cost the City one dime. We owe to it our retirees to offer them the best and most cost-efficient health and prescription plans their money can buy. And I thank you for your consideration.
Thank you very much for your testimony. Mr. Volpe, have you had discussions with either the personnel director or Rite Aid representatives about your concerns in the articulate way that you've laid them out today?
In the past, the Pension Board and myself have talked to the City about this. A number of years, I made reference in my testimony to the cap that was on the prescriptions of $800. That's been changed, so that was a positive. And then very recently, I talked to Linda Seyda, and she says that she does believe that there is some way to allow the pensioners to opt out of the Rite Aid prescription coverage, which would be an absolute positive, because it is very unfortunate for these people. 12 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 They must -- if they select the City's offered health-care coverage, offered health-care coverage, and pay for that, they are locked into the Rite Aid; when, quite possibly, there are cheaper plans out there, especially through the HMOs. Some of these HMOs have very affordable plans -- prescription plans.
Now, this kind of locked-in situation, is that for all retirees, regardless of what either branch of the government or representative or non-representative status they may have had when they were active employees?
This group is primarily non-represented employees. Firefighters, police etc., other union members oftentimes go through their own, the union coverage. Some drop out, and if drop out, they would go into this.
Okay. One quick item of housekeeping. Councilman Cohen has arrived, the Chair of the Committee on Law and Government. And to my right is Councilwoman Fernandez, Councilwoman Donna Miller and Councilman Mariano, who have also joined the table 13 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 here. Please continue.
Okay. Will be sure -- the personnel director and the Rite Aid representatives are here. We'll be sure to follow up on the items that you have mentioned. I don't know if you're able to stay. You might want to hear the responses. Are there any other questions for Mr. Volpe by members of the joint committees? (No questions.)
Do any of the unions representing City employees cover retirees beyond the four-year period?
Yes. Different unions have different plans for retirees. 14 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I have some general understanding. I don't have a list or anything like that of what the --
Do we have a right to inquire of the unions what their terms are?
Then I'd like to find that because I'd like to out how different groups of City employees fare. It seems to me to be an anarchistic system that makes no sense to have totally different rules applying for different people. And if we're going to have that, at least everybody ought to be brought up to the maximum level. Now, to what extent has the City disputed with Rite Aid the cost that they charge employees after the four-year period? Has the City taken a firm position with Rite Aid and said that under no circumstance must you charge these outrageous price; and if you do, we will not contract with you? What do you know 15 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 about that?
I really can't answer that. I do know that the City did take a proactive stance on the cap that was on the prescription limit and did get Rite Aid to -- I believe the City and/or Rite Aid did increase that, and that was a positive. On the current issue --
It used to be three, four years ago that these retirees, these post-City-credit retirees, they paid in for their prescription plan coverage. And their coverage limit, in terms of the amount of prescriptions they could purchase, was limited to $800 or something like that per person per year. That was increased to $1500 per person per year. So that was a positive. In terms of any negotiations or any conversations with Rite Aid related to the issues I'm raising, I'm not sure which have occurred. I do know that this could be as much a City issue as it is a Rite Aid issue, so that's --
Well, that's what 16 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 we're trying to establish.
Because all we know is the City kept all of its policies totally secretive so that nobody knows anything, and has permitted a system to develop where different retirees get different kinds of post-retirement benefits; despite the fact that all of them were under the illusion at one time that they worked for the City of Philadelphia and, therefore, were entitled to certain basic rights.
Now, it also seems as if the City at various times has put the responsibility on retirees rather than accepting it, but we don't know who sets the rates. When I say "we," I'm speaking of exempt people.
We know there've been a 500 percent increase in the cost of Rite Aid prescriptions in the few years, as far as the 17 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 employees are concerned, who are exempt. We started -- I guess it was a big sales pitch, please don't object to this agreement with Rite Aid, we're only going to charge $1 per prescription. It's now $5. That's a 500 percent increase. So I think it's an absolutely outrageous increase. On the other side, the cost of paying doctors has also increased, but we don't know whose fault it is. It could have been the City saying, Oh, if you gotta charge more, let's dump it on the employees instead of the City assuming an obligation. Or it could have been at Rite Aid. These hearings are for the purpose of finding out what the facts are. We don't have a final conclusion because we don't know what the fact are. So we're asking your office, which we regard as the watch dog on behalf of all City employees, we're asking that you get together the information, and perhaps be prepared, Mr. Cochairman, to present it at a subsequent hearing.
So that we'll get a firm grounding on what the situation is. And from 18 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 that, you know, we can then move forward.
Sure. We will attempt to gather the information in terms of the different union coverage that's out there. You know, this is something in the past that we recommended years ago that they collapse the different union plans into a City plan. We believe that would be much more efficient. And I think, if you're asking the personnel director, she would agree wholeheartedly with that, and she would --
Well, that may be. But in the area where the City has had responsibility, the City seems to have done an absolutely atrocious job because the City seems to have no interest in the retirees and seems to be willing to put heavier burdens on them rather than assuming its rightful obligation to people who are former employees. So I don't see -- I don't see this as a major problem, trying to compel the unions to fold into one plan. That might be good, but it may or may not be possible, you know, based upon collective bargaining standards that have been 19 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 applied. But I would like to see that at least in the area that the City has the responsibility that's kind of shared, that the employees are not kept in the dark and confronted with decisions already made as if we had no rights. Because, otherwise, I'm going to be proposing that City Council, which is a separate legislative body, develop its own plans. We don't have to go with the City, meaning the City Administration's plan. We're our own legislative body. And I don't see why our employees should be subject to a plan that seems basically unfair. So that's the reason we need all of the facts. And the problem in my mind is just to find out what the unions do because, apparently, we may gain some very valuable input. I think they've probably done a far better job than the City has insofar as the employees are concerned, you know, in protecting the rights of employees.
That's possible. I mean, these plans are private plans. We pay a per-month per-head charge to the unions for this type of 20 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 coverage. And then they basically, other than having some oversight in terms of a trust, you know, that normally is created where we normally have one or two members from the Administration or the City government in terms of oversight. It is separated; it isn't like it used to be five or six years ago when the City paid an amount, and that's what it was, and then we could go in and audit it and do certain things. We really can't do that anymore. You're paying them a per-diem charge.
Well, we'd like to know what it is because there may be legislation that we want to propose that helps everybody in this situation. Because the present situation is madness. Let me ask you one further question. Do I read your -- I'm sorry I was a bit late because of another conference, but do I read your statement correctly that for post-retirees, the post-retirees are charged by companies doing business with the City on the basis of 58.96 per person per month?
That's correct, that's 21 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 correct.
Per person? You know, if somebody still has children they're still responsible for?
If they had a dependent child -- and there are a few that have that -- they would be charged per person.
And I don't know why we'd want to do business with a company that would have a policy like that.
I actually wanted to explore that area myself, Mr. Volpe.
Thank you. Mr. Volpe, you went through the testimony and I'm literally now just understanding that fine point that you're making. For the active employee, the City pays 22 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 $65 per member per month; is that correct?
Well, that -- I'm not sure if that's the active employee. That's really the employee who the City is paying for the first four years after retirement.
Forget about retirement. I believe the current figure for the '98 contract is proposed to be $65 per member per month.
Then you go into retiree status, and it continues at the $65 per member per month for four years; is that correct?
And once you leave the four-year post-active or are now in the retirement phase of your life, if you have other members of your family at home and they want to be 23 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 covered, you would end up paying $58.96 for each covered person; is that correct?
So you could go from the City paying -- your testimony is the City pays $65 per month for the whole family while they're working and for four years post-retirement. Then the person pays out of their pocket $58.96 for them and possibly a spouse or other dependents in the household.
And you -- so, you know, $56.98 sounds like 116, 117 a month just for those two people so --
I do not know. This is 24 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 something we talked about at the Pension Board. You know, as a trustee and as the other trustees, we get feedback from the pensioners, and they're upset about this. And that's -- I'm not here to criticize Rite Aid or criticize the City; I'm here to give you information based on what I believe is inequitable treatment of these employees. I just don't feel it's fair for them.
Councilman Nutter, just a comment. I think we've found out how there's -- how the financing for the proliferation of these drug stores have occurred. I think we've gotten to the source of the money needed to finance those.
We may have. And did I also understand your testimony to be that these post-retirement people, after the four years, are -- if they continue to want to have City plan health coverage, they have to stay in the Rite Aid system?
If they opt out of Rite Aid for their prescriptions, they can not 25 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 have City coverage anymore?
Would you go over that again? I heard that the first time, and I was kind of startled by that even more so.
If a person retires and they wish to keep City health coverage with, I guess, one of the HMOs --
-- which -- do they pay for -- they don't pay for the first four years?
After the four-year period, if they wish to continue to have City health coverage, they have to participate in the Rite Aid prescription drug program. If they try COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to opt out of the Rite Aid prescription drug program, then they cannot keep City coverage.
That's a pretty sweet deal, it seems to me -- not for the employee but for Rite Aid.
Is there anything else for Mr. Volpe? Councilwoman Fernandez.
I just want to clarify on the -- after the four years, when it --
That's why they have to keep things secret, apparently.
When it kicks in that the retiree would pay $58.96 per person per month, is that essentially their copay?
To get, then, any kind of prescriptions they want?
But then 27 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 later, when it says that coverage is capped at $1500 per person, does the coverage mean the value of the prescriptions that they buy?
Okay. Because that's different from the copay that City employees have where you pay this -- now it's the $5 for whatever prescription you get.
Councilwoman, I'm not sure what the copay is for these employees, to be perfectly honest. And I should.
The Councilwoman raises a very interesting point because I don't know whether we know or not if those people also have to pay a copay.
One question. Who dictates the plan in that sense? Is it Rite Aid or the City?
Well, it's the City's plan. The City would negotiate with whatever provider is 28 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 out there -- in this case Rite Aid -- for prescription coverage.
Well, in essence, Rite Aid's saying the City offered this plan, and Rite Aid came in and bought that plan, bought into it, offered their bid and said, We'll go along with your plan. This is the City's plan.
Could I just pursue again? I'm just having trouble with --
If after the four years, a retiree chooses to pay for the City health plan in general, the employee has to accept the Rite Aid prescription plan? Now. Is that at 56 --
You mean the City is demanding that people have to pay that amount to Rite Aid in order to maintain the City plan?
They are coupled; you can't 29 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 separate them. If you're going to take a City-sponsors HMO, for example, you must select the Rite Aid prescription plan.
It's unbelievable that the City would enter into such an agreement or make such a requirement. I don't -- if Councilman Ortiz is right, it's the City that sets the plans up, and the companies just bid on the plans proffered by the City.
Councilwoman Miller, I think, wants to ask a question.
Hi. Councilwoman Miller. I have one question. Does the post-retirement and the retirement impact all City employees, or does unions have like separate agreements?
They normally have separate plans that they sponsor for their former 30 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 employees. This is mainly non-represented City employees and union dropouts, of which there's a little under 600 currently. And it's been going down, I think it's being -- the number has been going down because I think they see that this is not the greatest plan so. . .
Well, how's the union plan working? I mean, is it different?
There are a variety of different union plans. There's -- the FOP sponsors plans through the LEHP and through PFMA. District Council 47 has plans. There are different plans that are out this.
There are a couple of outstanding -- I mean there are certainly tons of questions, but I would like to ask Miss Seyda to come up. (Linda Seyda comes forward.)
And Councilwoman Fernandez opened up a line of questioning which, I think it's unclear about retirees and per-person 31 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 per-month costs as well as the prospect of copay as well as the tie-in between City-sponsored health plans and the requirement of Rite Aid prescription drug plan participation. Miss Seyda, if you could identify yourself for the record and. . .
Good morning. My name is Linda Seyda, and I'm the Personnel Director for the City.
I don't think we heard any of that. Why don't want you -- all right.
My name is Linda Seyda, and I am the Personnel Director for the City of Philadelphia.
Good morning, Miss Seyda. I'm sure you have your own testimony, but we'd like to keep some consistency to the record. You were in the back listening. Can you provide some explanation and clarification on the per-member per-month fees that are charged for active or employees who are in their post-retirement but in the four-year window? 32 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And then the distinction made for post-four-year employees and the per-person per-month charge as well as the requirement of City-sponsored health plan coverage tied into Rite Aid prescription plan coverage as well as any copay that the post-four-year person may to pay.
Okay. For those employees who are in the first four years of their retirement period, they are covered in the same way as active employees. And that is consistent with the City's agreement with the employee organizations, in that the City contribution for health and welfare payments to the unions for the active employees is the same for the four-year employees. So the City makes a contribution to the union for active employees and post-four-year employees.
All right, stop right there. A person retires. When they were active, the City was paying $65 per month per employee for the prescription program and THEN were making whatever contribution in the amount 33 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 they were making for health-care coverage, right?
And was the employee paying for any of their health-care coverage during the active period?
They would be paying the same thing that they would have been paying as an active employee. So if they were enrolled in a plan that required an employee contribution as an active employee, that same employee contribution would carry over into the four-year retiree period.
Okay. But if you're in an HMO, you essentially don't really pay anything, right?
All right. So you leave active service, you go into now this four-window, the City continues to make the same contribution. And if the employee was paying something as an active employee for health-care coverage, they would continue to pay the same. If they were in an HMO and they're not paying anything, they would continue not to pay anything. 34 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Now, what happens after the four-year window to that same employee?
After four years, the employee has the option to continue receiving coverage through the City -- through the City plan, but there is no City contribution.
All right. So what does it cost that now-retired more-than-four-year employee, what does it start to cost them for health-care coverage? On average?
The cost would be whatever the City is paying the health-care provider. That -- that varies from plan to plan. On average --
Give us an example. Take U.S. Health Care, for example.
Sure. Do you have a list that would show all of the various plans? I mean, the sheet that you're reading from is it going to go down. . .
The -- for the Blue Cross Personal Choice plan, for example, depending upon 35 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 whether the coverage is for a single person, single-plus-one, or family, the cost ranges from $241 to $693 for a family member on a composite basis. That's $$418 per member per month.
Yeah, you lost me a little bit on that. Take us back through that again. Single coverage was. . . ?
Single coverage for the Personal Choice program is $241 per person per month.
Okay. So the single employee retires, it's now four years later, they start paying $200+ a month for their health-care coverage.
And then you gave a 36 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 -- you said something about a composite per person per month. That was the part I got lost on.
Yeah. The composite rate that the City pays for all of its employees as a group is $418 per month.
Okay, so now what exactly does the person pay? Do they pay the $200 figure, do they pay the $600 figure, do they pay the composite of 418?
If they're paying for it themselves, it's on a tiered basis. So that a single employee would pay the $240.
'Cause it just wouldn't -- it wouldn't be fair to have a single employee pay the composite rate of $418.
All right. Well, who pays $418? Does the family person pay 418??
If the City was paying the bill for the active employee -. 37 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
All right, so you retire and you have your family -- you have family coverage, you pay the 600-some-odd dollar figure?
Okay. Now, and tied into that, you now want prescription coverage.
That would be, you know, as Mr. Volpe testified, I believe it was --
So somehow if it's four people in this family, it's $58.96 times 4?
That could happen. I mean, there's -- at that point, there are very few retirees who have dependents. But, yes, that -- you are correct.
That may be the extreme. 38 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
All right. And let's say it's $58.96 times 2, so more than likely, they are also paying for single -- they're not paying for single-plus-one health coverage, or could they?
All right, right. And that figure, again, was single-plus-one? Don't flip back. It's somewhere between two and six. All right, now --
436. All right, so it's 436 for the health coverage, and it sounds like 117 or so for the prescription coverage.
Now, to respond to Councilwoman Fernandez's question, does that retiree pay -- in addition to the $58.96 times 2, do they also pay a copay when they actually go to 39 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the store to get a prescription?
It is the greater of 7 percent, or $5 for a generic drug and $10 for a 8 brand drug. 9
It's the greater of 20 12 percent, or $5 for a generic drug and $10 for a 13 brand drug. 14
Okay, it's the 15 greater of 20 percent of what, the actual cost of 16 the prescription? 17
All right. So why 20 don't we deal with some real figures here. The prescription costs $20. So it's the -- the prescription is $100. My colleague wants to -- for $100 worth of medicine, 20 percent is obviously $20. And it's the greater of 20 percent or $5 for generic and $10 for brand name. 40 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 So in that example, it's $20.
All right. And from Mr. Volpe, we were told, if you have the City coverage, you cannot opt out of the Rite Aid prescription drug program; is that correct?
That is true. I mean, at the current time, I think, as Mr. Volpe indicated, that we are looking at modifying the program for the next calendar year so that employees would have the option of taking just the health coverage or the health and the prescription coverage or not taking any coverage at all through the City.
Well, what was -- tell me -- just explain, if you can, what was the basis for the requirement that if you took one, you had to take the other? What was the thinking on that?
The concern being the 41 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 adverse selection that would occur and that the --
That's a very interesting term, but I have no idea what you're saying.
When we're talking about adverse selection, what we're talking about is the tendency for --
Are you saying that people wouldn't choose the Rite Aid plan?
Well, the people who would elect to take the coverage would be the people who would be the high-end users, the people who would have the greatest utilization of the plan.
In the example that you're talking about, it would be the prescription plan. That the people who needed the coverage the most and who would be the high-end users would be the people who would elect to take the coverage. And then you lose the benefit you have, you know, of spreading the cost out over a larger group.
Okay. So your certain was that if you're going to have all these high-end users or high-utilization users, you 42 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 wanted to capture other people who may not be those high-end users, and so you force everybody in, in hoping that it kind of balances out? Is that the theory?
Could I ask, Mr. Chairman, whose idea was that? Who raised this whole question of balancing?
Did that idea generate with the City or with Rite Aid or with health care or whoever may have been involved?
Well, basically, it was -- this was done as an accommodation for employees. Our obligation is to cover employees for the first four years of the retirement period. We did feel that we wanted to go beyond that four-year period and so that we developed a program that is certainly not as generous as the program for our active employees and our post-four-year employees but a program that would 43 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 permit the post-four-year employees to access a prescription program and also to participate in the City's group medical program.
Since the City has what we call "a defined benefit plan," right, and historically, with the impact of inflation, four years after retirement, you come up -- somebody comes up with this brainy idea that the people who need medicine a lot for their health reasons and that worked for the City and had been eligible for a retirement plan should suddenly have to pay much more for their medicines? Now, I just understand that kind of reasoning. Does -- is -- am I accurate in what I'm saying? Suddenly, they're faced with instead of, say, a $60-charge or a $65-charge, which is what the City was paying for them, now suddenly, they at least have two -- almost two sets of charges, a few dollars less but. . . I just don't understand what motivated anybody from the City to come up with such a plan. I can understand private employees coming up with such a plan, but I'm wondering what was the genesis? Whose idea was it? 44 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Was it presented by some private companies, or was it our own City brains that generated the idea -- or lack of brains? I don't know which I would have to characterize it as.
The intention was to provide the retiree benefit at the same level that was provided to the employee organizations. And for those employees who are in a bargaining unit, the City makes a contribution for the first four years only; the City does not make a contribution after that initial four-year period.
What decides that limit of time? Why isn't it for life instead of for four years, as many plans have it?
People don't die after that four years; they have to live. And, generally speaking, except for the current period, inflation is already reduced, whatever defined pension they get. So they're not in a position of paying more but in position to pay less; but suddenly, we're increasing their medical costs? Now, why -- where does that four-year 45 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 limit come from?
That's negotiated between the City and the employee organizations. At one time, it was --
So you're saying that the exempt employees of the City really are very much involved in union negotiations?
In the sense that they are either the beneficiaries of or the sufferers of whatever happens in employee negotiations. If the unions were successful in negotiating a for-life coverage, which, I think, some, outside of the City, maybe even some of the City unions may have, I don't know. But I know a number of outside-of-the-City unions have it. But if the City unions negotiate it, then the nonunion people would also be covered, based upon City policy.
That's a decision that would have to be made in the event that that happened.
Councilman, would 46 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 you yield to --
I believe Councilwoman Fernandez has a question in the same area.
Again, going back, I think we have a whole series of questions about the plan covering current employees, but sticking with the one for the post-four-year retirees, is it correct that the post-four-year retiree would pay $58.96 per person per month for the prescription benefits, and that they could pay up to percent of all of the prescriptions they 15 purchase? Which, I averaged out, could be, if you 16 were at the highest level, could be another $25 a 17 month, if you used your cap. 18 And then what I'm driving at is, Mr. 19 Volpe had said that coverage would be capped at 20 $1500 per person per year. So could you check my math for me? A person would pay $58.96 per month for their pay into the plan, then their copay could be up to $25 a month. So potentially, a high user could be paying $980 a month for $1500 worth of 47 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 prescriptions. Am I following that right? Does the coverage mean that? Coverage means, once I've purchased $1500 worth of prescriptions in a year, then I have to pay it all myself?
Okay. So double-check my math, but it seems to me, unless I'm making a mathematical error, for $1500 worth of prescriptions, I could potentially be paying $980 out of my pocket when I add my monthly fee plus my copay.
I have to trust you on that figure. I don't have a calculator here with me.
We're in that ballpark. I don't see what a bargain that is. I mean a bargain for the employee.
This was part of the reform movement of six years ago, remember that.
I mean -- see, basically, this is a fairly small group of employees.
Miss Seyda, is 48 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 there agreement on the accuracy here?
Yeah. This is basically a relatively small group of employees. And, basically, the pool of money that this group of employees puts into this plan is the money that funds the benefit.
So the City doesn't want to put any money in this.
But what I was leading up to, from the employee's point of view, this would not be a terrific plan if I'm a high user of prescriptions.
If I am a high user, I will probably get to the max. I don't have that utilization data here for that group, so I really can't speak to that with any sense of, you know, any level of comfort.
Mm-hmm. This is getting into the other issue. But then could 49 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 you, just for the record, tell me who negotiated this agreement for the non-represented employees? Were you part of the negotiations?
And who else is part of that? Who else made that contract? Because I -- there was a contract made that came before Council, was it 1993 or so?
This contract has never -- the contract itself has never came to Council.
Councilwoman, what you're remembering is we hearings on the initial Rite Aid contract in about 1993.
Exactly. Well, because that was the start of it, and there were a lot of concerns about Rite Aid taking over the prescription drug program. And so in our first term, when this issue came up, there were public hearings on the whole Rite Aid issue. 50 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 That's what you're thinking about, that the contract is a yearly contract. I believe the first was one year with three one-year renewals--
-- which is the avoidance of bringing the contract to City Council.
And now this is seven years later, so has another contract been -- has the --
There was a '96 contract that had, I believe, three one-year renewals to it. And there was a '97 amendment to that contract which is calling for -- there was -- there was -- 51 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Two renewals. One year, and two one-year renewals. Then the City entered into an amendment to that contract that allowed the Rite Aid contract to expire on December 31, 1997. There has since been a --.
The contract that the City entered into in 1996 was a one-year contract that provided for two renewals. There was a renewal in 1997 and a renewal in 1998. And so we are now in the, I guess, basically, the third year of that.
Well, Miss Seyda, what I'm referring to is that there was an agreement of amendment dated June 11, 1997, which amended the 1996 contract.
That's correct. 52 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Two days ago, the City signed a new contract for 1998 with Rite Aid, which you and I both are aware of.
Thank you, Mr. Chairman. I'd like to refer to a specific case, Councilman Cohen, and I was here a few minutes before you. Your office -- Julie worked on this, and I will refer this case to you. We have a client in the background. She's an employee in the Police Department, in their Management Revenue Bureau, who learned in April 96 that she has MS. She's taking a drug that the City, through Rite Aid, totally paid for, 100 percent, and then just recently decided that the client has to pay percent or the City would 24 cover 75 percent up to for injectables, for 25 injections. And that -- yes, and up to $10,000. 53 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Now, in her case, she has to pay almost $900 a month for injections. She has to get weekly injections. Insulin is exempted, so people who need insulin have full coverage. But this woman here has a child in college and cannot pay $223 a month for injections, works for the City Police Department, and her health is deteriorating. She's here today because she can't pay the freight. She's supposed to pay $225 -- almost $223.25 a month that folks who take are exempted from. And they say there's a small class of multiple sclerosis folks who don't get this benefit. Now, what can we do? I've also been told that the City can make exceptions. I would hopefully request in this case that a request can be made and that the chairmen of both committees would look into having this group of people exempted as well so that they can receive the same benefits as those who receive insulin.
I am -- I am familiar with this case. As background, when the City restructured its prescription program, injectables, with the exception of insulin, were 54 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 excluded from coverage.
Excluded. Injectables, with the exception of insulin, were excluded. On an exception basis, the City did agree to cover injectables pending the development of a Citywide policy on this. In 1997 --
Before you get to that, can you tell us what the basis was --
Could you tell us what the basis was that there should be an exclusion in such a case? Under any circumstances at any time, what was the thinking, let the people die, that they're too expensive to be kept alive? I mean, what was the thinking that said that these people should be excluded at any time?
Injectables are basically a standard exclusion in prescription drug programs.
Basically, it's the industry standard. And for those employees who wish to cover them, then there's an additional 55 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 premium, and the employer agrees that they will cover injectables. Some employers --
And the City chose to go with those employers who did not cover?
By the City Administration. I mean, I don't know that the Mayor himself made that decision, but it was certainly a -- the restructuring of the program was certainly something that we did with the full knowledge and consent of the Administration . 56 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
And did you ever report to Council that you were doing that? Do you have any record that shows that City Council was notified that we're covering certain groups but we're excluding or so? And in that letter, would you have told us what arrangements you were making to see that they would be covered, would get appropriate care?
I just can't believe what the personnel director is saying.
The information was provided to all employees but because we felt that this was too great of a hardship, we did agree that we would cover injectables on a case-by-case basis.
You mean slow death instead of immediate execution? 57 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Miss Seyda, let me -- let me -- I'm sorry, Councilman, let me just interject.
When you say that all employees were notified, this would be general notification that all employees received around and about the -- you have a term for this. I believe it's --
Open enrollment. Usually somewhere around December 1st, although, I believe, last year, in our cases, it was on or about December 8th. We usually get a package of materials for the open-enrollment period. Are you saying that we were notified in that communication? There's a fair amount of information in that distribution; is that correct?
And is it fair to say that you would have to somewhat aggressively look for this information to know either about the one point we're talking about or the other 58 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 proposed changes to the health care plan or any of our plans? You would have to read through all of the materials at that one point in time; is that correct?
Well, what we do at the beginning of the open-enrollment period is we send out a good bit of information to employees. With that information, we always include a sheet or a couple of sheets which basically highlight the changes in the program from one year to the next because we do understand that it's a considerable amount of information that is distributed to the employees.
Well, let me ask this question 'cause for myself, at least, part of the way I ended up in this is that I happened to have had a little extra time on December 8th -- much to your regret, I'm sure -- and I actually read the materials for the first time. And that's how I found out about the copay increase, part of what we're discussing here today. But what is the recourse for employees and certainly non-elected officials? I mean, if an employee reads something in the 20-some-odd 59 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 pages that get sent out and may potentially affect them, what is their real recourse at the end of the day? What can they do about it? Who do they complain to? How does it get changed?
I think it happens a variety of different ways. Some employees will go to their departmental personnel office. I would say more generally that complaints or concerns will come to the benefits office in my department.
And are changes made? Or you just receive the comments and you give the explanation to the people and that's the end of the discussion?
We do make every effort to accommodate employees where we can. We do have to take costs into consideration. The one case that you have brought to -- put on the table today concerning this individual who does take an -- has an injectable treatment plan, in response to the concerns that she raised with our office, we did, again, review the injectable policy, and we are in the process of modifying that policy. So I do think that -- 60 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Is that person going to covered by the exception rule? Or is the policy going to be changed, or are they going to continue to have to pay the $223.25 a month?
The policy is going to change so that coverage can be provided in those situations where it's determined to be cost-effective in relation to the expense the City might otherwise incur without this treatment plan.
You start talking about cost-effectiveness. Is this for the individual person? You know, if there are five people, it's one thing; if there are fifty, it's something else? I mean, Miss Seyda, what does that mean?
The case -- her case and any other case like it would be reviewed on a case-by-case basis.
And what's the cost-benefit analysis that you propose to go through? How are you going to make this 61 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 decision?
We're in the process of identifying an outside person or persons to do that.
Miss Seyda, this person could walk but is now on a cane; she couldn't walk in here on her own volition today before. I don't know what that means? What will happen to her before our hearing ends, or who's going to tell her what help she can get before this hearing is over? What happens to her? She can't wait physically until we come up with a new plan. This woman needs help today. What will happen?
We want to know what will happen in this case today, and then we can -- 62 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
When? What can we do to help this lady? I would like some response on this specific case today, we can talk about generalities certainly later, but we need a commitment for some help for this lady today.
Okay. I am -- based upon the information that I have seen on this particular case, I am confident that there will be some relief for this individual.
Well, let me ask you this: How long has this case been known?
Was it the most recent open-enrollment period, was it the last one, was it two enrollments ago, ten years ago? How long have we known that we've had this kind of issue, whether generally or specifically to the individual that Councilwoman Blackwell has referred to?
Generally, we have had -- we have had knowledge of this general issue for 63 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the last several years. In terms of this specific case, this case, as far as I know, just came to our attention when the injectable policy was modified at the beginning of this year.
Or proposed to be modified back on December 1, 1997; is that correct?
Well, let me ask this question: Who's going to make the decision? Who's involved in the decision-making process generally on the policy and specifically in this particular case? Name the individuals who are involved in changing the policy.
Following up on the Chairman's question, I have here a thing that says, "How to Apply for the Injectable Drug Program," and you write a letter to Laurie Davey, at 1530 MSB. I'd like to find out how many requests have been submitted, how many have been granted, 64 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 and the reasons why the rejections have gone forward in terms of this program. And I think that follow ups in terms of the Chairman wanting to know who it is that makes decisions. Mr. Volpe, Mr. Volpe, are you leaving?
I would assume you have a part of the answer to my question right now, right? Who's involved in making the decision in this matter? Are you the --
This particular case and the policy in general. There can only be a few people. You're the Personnel Director. I mean, if kind of just keep going up the chain, we've got the Managing Director, maybe take a side step to the Chief of Staff, Mayor. Maybe the Finance Director is involved as well. I mean, it's a limited circle of people, right?
And all of those individuals that I've named would more than likely 65 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 have some involvement in this, right?
Yes. And we did a cost analysis of this. We believe that the cost is not so great that we cannot justify a further change in the policy. The Administration has signed off on that. And at this point in time, it's -- it's purely -- or only a matter of having a medical review of the case. But as far as the Administration --
Are you saying there's never been a medical review in this particular case?
Are you saying that there has not been a medical review in this particular case or the employee has not shared any medical information with us?
I don't know that -- exactly who have reviewed the medical record. 66 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Is there any question that the person needs the injectables that they're using? Is that in doubt? Or that they're being prescribed for a medically-necessary purpose?
I have not looked at the medical records of this individual. I'm certainly not a person who should look at the medical records of the individual. I mean, it should be a medical, a clinical person who needs to look at them.
To be honest with you, I just simply don't know who has attempted to look at this woman's records.
All right, all right. I'll you that. At the same time, Miss Seyda, by your own testimony, you individually or the office in general has been aware of this particular case since somewhere in December 1997. It is now May of 1998, with no answer. What I would like to ask, with every respect to you, is to get us an answer by the end of this day as to what is going to happen and what 67 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 decision has been made with regard to this particular employee specifically and the policy in general. You have already said that the Administration has almost, in essence, signed off on a policy. I left you at the question of medical records. But if you're telling me that the policy question has already pretty much been dealt with, then you should pretty much be able to answer this question at the end of the day. Make it easy on yourself.
Just to clarify the last thing, would you write a letter that we can read and understand. For example, in connection with this, a letter went out two days ago, May 19th, by Lee White, Benefit Administration Supervisor. (Reading letter.) 68 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Dear Miss Gallagher: (The person we're speaking about.) After a review of the City's policy regarding the coverage of injectable drugs, the City is further modifying its program to establish criteria under which certain injectables can be covered at a higher level (whatever that may mean.) Coverage at this higher level (still maintaining the great mystery of whatever a higher level is) would only occur if it was determined to be cost-effective in relation to the expense the City might otherwise incur without the injectable treatment plan. We will keep you informed of new developments. Please, Miss Seyda, I don't understand what's in anybody's mind who would write such an unintelligible letter. I can't -- I've had my staff read it, I have had other Councilmembers look at it, and I've asked them, What does this letter mean, what does it say? None of us know what this letter means. Now, can you tell us what this letter means? And does anybody review letters that go out from your department? 69 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
If I could -- if I could respond by, I guess -- again, reiterating my agreement to the Chairman Nutter to provide additional communication for your -- for both --
In fact, on the Rite Aid matter, the main responsibility is the Law and Government Committee, but we're working together. It's Council Nutter's resolution that's raising these basic issues.
And I will be pleased to provide the same letter to both you, Councilman Cohen, and to you, Councilman Nutter.
But couldn't you tell us what this letter means that went out? I mean, you know, we're very embarrassed when a constituent comes to us and -- 70 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
-- shows us a letter and says, "I don't understand it, you're a member of City Council, you certainly can understand it."
Are you aware of the -- I mean, you heard the Councilman read it into the record. Are you aware of this letter?
Can tell us what Mr. White was trying to communicate to our public employee by way of this letter? What was he trying to say?
In terms of a higher level, that's the question of the percent copay. I 20 think probably the most simplistic way of 21 restating what's in this letter would be: Subject 22 to a review of the medical records, we are 23 confident that this treatment plan will be 24 covered. 25
To me -- you know 71 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 what it says to me? It says, "We hope that you don't go broke or die before we modify the criteria." That's what it means.
Well, I'm un -- then I apologize. That certainly was not the intent of the letter.
And probably due to Mr. Volpe or -- what does the City pay Rite Aid? And I want -- what is the dollar amount per year and per month of gross receipts of Rite Aid Corporation for all pharmaceutical services to the City of Philadelphia employees, subscribers, and their dependents? Do we have that information, Miss Seyda or Mr. Volpe? How can we get that information? Or shouldn't we have that information? Because we should have some criteria of how much money it is that we're paying and what type of services we're buying.
Okay. We pay Rite Aid, as I think is already on the record, at the rate of 72 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 $65 per member per month for all covered employees. In terms of what that total amount is, I don't have it here, but it's certainly available, and I will be happy to provide it for you.
Miss Seyda. Let me ask you this question: By way of some other letters that are floating around, would it be accurate to calculate that at $65 per month times, I believe, 8,322 non-represented employees, this is -- There is a letter, a copy of a letter dated October 1, 1997, from a Charles Schneider, at Eagle Managed Care to a Mr. Manuel Stamatakis, President and CEO of Capital Management Enterprises. That letter indicates that in group numbers 19000 and 19001, the average number of members is 8,322. The increase for the 1998 subscriber period is supposed to go to $65 per month per member. Is it accurate to say that we should multiply 8322 times 65 times 12, and that would give us the first indication of what the Rite Aid 73 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 contract is worth?
And then, in that letter, there is a group called 19002. And that may be the individuals that Mr. Volpe was referring to -- I could be incorrect.
Times 12 would tell us the annual value of that. That figure is $7,047,978. Would you say that that was fairly accurate?
In terms of what the revenue relationship is between the City of Philadelphia and the Rite Aid Corporation?
That's $7,047,978 that's covering approximately 9,010 or 9,015 and some employees; is that right?
Yes. I'm trusting your arithmetic. 74 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Does that include the copay income of Rite Aid? Do we have any figures on that?
Councilman, I do not believe that that includes any copay figures; although the Rite Aid representatives are here, and I certainly plan to ask them those questions. I believe that that's just the City --
We can, you know, certainly estimate it from the utilization analysis that we receive from Rite Aid on a regular basis. They do provide information to us in terms of the number of prescriptions that they fill on a monthly basis. We get that information, so we can certainly develop that number very easily.
Miss Seyda, from another conversation you and I had, is the 75 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 standard on that Rite Aid estimates that our employees typically get 1.8 prescriptions per month?
Subsequent to that conversation that we had, I did review the utilization analysis and the number that -- that 1.8 is a little bit low. For 1997, the utilization level was actually two prescriptions per covered subscriber per month.
All right. So we might arrive at the figure that my colleagues are asking about by multiplying 2 prescriptions per month time 9,000 employees times 12? Would we arrive at that figure?
That's assuming that utilization for 1998 is consistent with utilization for 1997.
That's 2 scrips a month, 9,000 employees, 12 months at, now, $5. Correct?
Okay. We'll have a figure shortly. Are there any other questions for Mr. 76 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Volpe? I think he was trying to scoot out of here.
I have a matter, and I don't know whether it's for Mr. Volpe or Miss Seyda. Can you outline what happened to the change in the copay prices that began at $1 and have now multiplied by 500 percent? How did that happen, how was it negotiated? Who made the decisions that employees were to pay the increase rather than the City? Whatever was involved in that, how did it all come about?
I believe that in my testimony, that I do address that issue. Prior to restructuring the City's prescription program in 1993, there were several -- there was a varied copay structure with employees generally paying from $3 to $6, depending upon the type of drug that was prescribed. There were a few employees who had a $1 copay. But for the most part, it was a $3 or $6 copay. At that time, we restructured the 77 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 program. We were able to achieve substantial savings, savings of approximately 40 percent; and at the same time that we reduced the copay to $1 per prescription. That was increased to --
Well, let's -- I'm awfully sorry. Is that how you arrived at the $1 cost? I'm trying to figure out what -- how did you first arrive at that dollar cost, and I can't relate what you said to that.
And I realize that I must have missed something. How did you first arrive at the $1 cost? Was it a come-on to convince City Council that this is a great plan and, therefore, you don't have to bother discussing it at such a great bargain? Or was it an effort to determine what the copay really ought to be based on industry experiences? We were told when it was presented the first time that this had been very scientifically studied, everything had been studied in the field, and this $1 pay was not a come-on, this was genuine. 78 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 To my knowledge, the costs -- the employee usage has not been multiplied by since 4 that first time. So I just don't understand -- or 5 any other basis for evaluation. I know of nothing that's increased 500 percent. Were you not telling us the truth? Or was the analysis faulty in the beginning?
Before you respond, let me do two things: One, why don't we, at this point, get the Rite Aid Corporation up to the table because I know, out of this question, we're going to lead into a number of Rite Aid questions.
Why don't we get the Rite Aid representatives up at the witness table.
And, secondly, for the record, Council DiCicco has joined the committee as well. Miss Seyda, please respond.
Okay. Well, in 1993, when we were able to achieve significant savings, we 79 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 felt it was appropriate to --
From what the prescription costs had been prior to that. Prior to 1993, our prescription costs were running about $63 per person per month. With the restructuring of the plan, we were able to achieve substantial savings, and we thought it was appropriate to pass some of those savings on to the employees. And so that basically was the reason that we wanted to reduce the copay. And we did that and it became, as you know, $1.
It was -- for most employees, it was $3 for a generic drug prescription, and $6 for brand-name drugs.
And then this plan was proposed? This was good for the employees because they were going to save money and the 80 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 copay was going to go down to $1, right?
Yes. We thought it was appropriate to share those savings with the employees.
Mm-hmm. Now tell us how it came from 1 to 5. And you got a warm response, everybody was very happy about the reduction and the copay. Now then what happened? Now the honeymoon is over and we're well into the plan and now we find that the copay has increased by 500 percent. Would it be accurate to say, in a sense of fairness, that the costs to the City had increased 500 percent also on medical plans since 1993 and, therefore, you felt that it was only fair that the employees should also share the same percentage? Tell me what has happened from 1993 to currently with respect to the City's cost. Has it multiplied by 5?
The copay was increased from $1 to $2.50 at the time that the City, after consultation with Council, did agree to expand the network. 81 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
There never was any consultation with Council with respect to the increase from $1 to 2.50, none of us knew of it. I'm talking of Members of City Council.
Mr. Chairman, my cochair, let me put at least one piece of information on the record. In 1993, as a result of very active City Council hearings on the prospect of Rite Aid coming to provide the service for the City, there were a host of discussions primarily directed at not only the service that they would provide but the impact or potential impact on a large number of independent pharmacists. Before the Rite Aid contract, I believe our prescriptions were handled by PAID Prescription Drug Program, which hosted a large number of independent pharmacies throughout the City to participate. The conditions of the Rite Aid contract called for Rite Aid to primarily have the exclusive prescription plan for the City but there were 10 independents -- 10, no more than 12 independent pharmacies that were allowed to 82 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 participate in the program, primarily to cover areas where Rite Aid had no stores. Subsequent to that, there were numerous discussions about the RFP and total dissatisfaction with the limited number of independents participating in the program. What Miss Seyda is referring to is as a part of some general agitation by a number of members, the network was opened to a much larger number of independent pharmacists. What Miss Seyda's is putting on the record is that as a result of those discussions and the agreement by the City to open it up to a larger number of independent pharmacists, the City's response or Rite Aid's response or the joint response was that the copay would also increase. Those two incidents certainly did happen at the same time, but I would probably disagree with her slightly that there was general agreement about that or the one necessarily had to precipitate the other.
Or that there were discussions or an agreement with Council. 83 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Or that there was a general agreement with City Council. Certainly some members who were involved in the issue could have been aware. But, as we all know, notwithstanding that we don't take the position that that means that all members were notified or that the body somehow participated in it. There was no contract for members to vote on, there were no briefings, there were no 11 general discussions, there was no resolution or any other mechanism that Council, as a body, would utilize to express its opinion or approval or disapproval. Is that accurate, Miss Seyda?
But that reduces the percentage increase to 100 percent from 500 percent. 84 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
The copay was increased in 1996. And that was the time when we, as the Councilman indicated, that we opened up the network and the independent pharmacists were invited to --
And that was at the time when we expanded the network and the independent pharmacists were invited to participate in the program. And at that time, in order to ameliorate the additional costs that we expected and did incur at that time, we did increase the copay from $1 to $2.50.
So, Miss Seyda, the City's position is that the copay was only increased from the $1 to the 2.50 to accommodate the independent pharmacists when the network was 85 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 expanded to cover costs of having the independents in the network. Is that your testimony?
At that time, the City went from a capitated plan to a fee-for-service plan, and it was anticipated that there would be additional costs that the City would have to absorb and that we -- therefore, we felt it appropriate to increase the copay from $1 to $2.50 in order to absorb some but certainly not all of those costs.
And if the City had not increased the copay, what would it have meant to the City? In other words, was it a City decision to increase the copay, say, from $1 to $2.50? What were the cost that were involved, how much? What was the amount of costs?
I can't give you -- I can't give you a number, you know right now, but it would -- the number would represent the $1.50 difference for each prescription that was filled. Those were costs which would have had to have been 86 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 absorbed by the City in addition to other costs which the City absorbed.
You mean costs levied by the Rite Aid and independent pharmacist groups? Would you be able to recapture those costs by your records and give that information to the committee, either at a subsequent hearing or in written form prior thereto?
I assume so. We would have to go back and look at records from 1996, I assume those records are available. And it would be a fairly straightforward computation.
All right. We would like to, and would you let Chairman Nutter know about that, about how soon you might be able to get that material prepared after you go over the records. So let's start now with the 2.50 as of January 1996.
If I can for one second, Councilman. 87 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Miss Seyda, can you explain the difference briefly and with as little technical terminology as possible, the difference between the capitated plan and the fee-for-service plan. And what was the reason that the City switched from the capitated plan? Rite Aid presented or the City requested in an RFP, I believe, a capitated plan. Rite Aid believed that they could control utilization, keep costs down. Then the network expanded to the independents, and the City switched to a fee-for-service plan, as I recall, because either the City or Rite Aid did not believe that they could exert the same level of control over the expanded independent network as they could with a narrower Rite Aid-controller network; is that correct?
But your question, Mr. Chairman, said the City or Rite Aid. Maybe we 88 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 could see which one it was.
Right. Why don't we have the Rite Aid representatives introduce themselves to the record, and let's talk about that and also the expansion from 2.50 to $5 . Please identify yourself for the record.
Chairman Nutter, Chairman Cohen, thank you for having us. My name is Elliot Gurson.
Sorry, sir. My name is Elliot Gurson, and I am Senior Vice President, General Counsel, and Secretary of Rite Aid Corporation. With me is Mr. Edward Hushen, and he is our Regional Manager in the Philadelphia area.
Okay. Thank you and good morning. Can you explain to us both the decision to switch from a capitated plan to a fee-for- service plan and also give some explanation as to why the copay was increased from 2.50 to $5. 89 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I can't do that of my own knowledge, sir, because it happened at a time that I was not at the Rite Aid Corporation. However, generally, our plans --
Well, I assume you must have gotten some background information or material in order to assist you to come to this hearing today.
But, generally, the difference between the two plans, as you know, is that one is, in effect, an insurance plan, a capitated plan, where we charge a per-member per-month rate without regard. And then having agreed to that rate, no matter how many prescriptions go through the system, that is what is paid per member per month. And it is totally our risk, if you will, if utilization is above that, which we thought it would be. 90 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
In a fee-for-service plan, the City, or the customer, if you will -- in this case, it's the City -- is charged an agreed price per prescription and pays for each prescription no 10 matter how many prescriptions run through the system. So the economics of the two different types of plans dictate different rates and sometimes different copay. Copay is a -- copays are used for a variety of reasons. Sometimes, as indicated in this plan, between brand and generic to encourage people to use generic drugs as opposed to brands drugs where that is medically feasible. In a --
Although in our plan, for the active employees, I thought the plan was -- or the program was a generic-driven program with the only exception being the doctor indicating on prescription.
That is correct. What I'm 91 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 suggesting is on a more general basis. You asked why an increase in the copay. And I'm saying, on a more general basis, it's in part the economics of the plan. And the decision was made at that time by the participants -- being the City and Rite Aid -- that we were in a position to go to a fee-for-service plan on a basis that was economic for us, and the City was willing to accept. Or you could look at it the other way, a plan that the City was willing to offer and we were willing to accept that required a $2.50 copay.
Okay. So now you've had a couple years in fee for service, we're at 2.50. What is the basis for the increase from 2.50 to $5.
The network certainly cannot be expanding. There are probably fewer independent pharmacists in the City of Philadelphia today than when Rite Aid came on the scene in '93. You would have to agree with that, right?
I would agree with that. 92 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
When we were asked the proposed rates for this year, our initial rate for groups 19000 and 19001 was $69.30. The City opted and we were asked to advise what the effect on that rate would be if the City were to institute a $5 copay. The effect of that was to reduce that proposed rate by $4.30 to the $65. In effect, we were prepared to -- Rite Aid was prepared to do this plan for the City and continue at it at $69.30 per member per month for the groups 19000 and 19001, with the $2.50 copay.
Hold on, Mr. Gurson. You can't say that you were prepared to continue at 69.30 because you weren't at 69.30, you were at $63.
I stand corrected, but to continue providing service but at the new rate of --
Right. And what's the basis for that? 93 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
The basis for that was utilization, costs of drugs continue to go up, costs of operations continue to go up.
Is it the cost of drugs have continued to go up or that there's been increased utilization or both?
It's probably all of that, and I cannot give you a specific answer, sir.
Okay. Are you having difficulty calculating what our yearly utilization is?
No, we are not. I just cannot give you a specific answer today.
I can tell you -- I imagine -- I can tell you that the costs of drugs have gone up. I do not know whether the City's utilization rate has gone up; I can find that out for you.
I do know that there were many new drugs. 1997 happened to be a year where 94 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 there were 50 new drugs introduced, at very high costs. Now, I don't know that people in the City used them or used them to any great extent, but generally, the price of drugs has gone up.
By way of the contract. So whatever the maximum allowable increase in the contract is over the past couple years, Rite Aid has sought that maximum increase.
Mr. Chairman, just for clarification. I'm confused on the fee for service and the monthly payment. Are we back now away from fee for service onto a per-capita plan? It seems to me to be not a fee-for-service 95 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 program.
So how long were we on a fee-per-service plan? I mean, that was experiment that failed, the fee-for-service plan?
And why did that -- what did your studies show? Or did you make studies? What caused you to change and go back to a per-capita figure again? To a capitated figure, is that the technical word?
It sounds like beheading to me. I don't like to use the word, yeah.
Because we felt that the City was in a better position with Rite Aid holding the risk.
Being an insurance policy as Mr. Gurson said, you wanted to convert, again, Rite Aid to be the insurer and to run the risk if there was an overusage. 96 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
So the experiment did not work? Did we make any studies to show that it was more expensive to have it on a fee-for-service basis?
Well, yes, the City's cost did increase. And, in fact, last year, we were under a capitated arrangement. Last year, we were under a capitated arrangement. And I believe that in 1997, the per-capita cost was $67 per member per month. So that, in fact, it was to the City's advantage to go on a capitated basis.
67. And what had it been on the fee for service? What was the cost to the City then?
Could you get that information to the chairman, Chairman Nutter?
Mr. Gurson, I 97 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 wanted to talk a little bit about some of these contracts.
The City has, over the past couple of years, signed a number of either contracts or amendments to contracts. Have you had an opportunity to review them?
I have had an opportunity to review the contract as it was originally signed. And I know about the amendments that have been signed since then.
And that would be contract -- for our purposes, Contract No. 15 96-6287.
That's okay. There's a subsequent agreement of amendment which, for our purposes, is No. 97-13094. Now, in the 1996 contract, which was effective January 1, 1996, that contract was a one-year contract. And I'm reading from item 10, term of agreement. The City may, at its sole option, renew 98 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the contract on an annual basis for up to three successive one-year renewal terms. So that's a one-year contract with three one-year renewal options.
Do you read it that way? Miss Seyda, we had some discussion back and forth. You seemed to think that it was a one-year contract with two renewals. The contract reads: The initial term of this contract shall commence on January 1, 1996 and shall terminate on December 31, 1996 or such date as the City determines in its sole discretion. Next paragraph: The City may, at its sole option, renew the contract on an annual basis for up to three successive one-year renewal terms. That's from the contract.
I agree with you, sir. It's three one-year terms. It would take you through 1999, if you will.
Exactly. But subsequent to that, on June 11, 1997, the City 99 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 signed a contract with Rite Aid called "An Agreement of Amendment" that changed that section 4 to read: The term of this agreement of amendment shall commence January 1, 1997 and shall terminate on December 31, 1997 or such date as the City determines, on its sole discretion. Is that correct?
So you're anticipating that the 1996 contract -- one year with three one-year renewals -- which could have gone to 1999 was effectively being capped or terminated, for these purposes, on December 31, 1997 unless renewed at the discretion of the parties.
I don't have that in front of me. And I'd like to refer to it because I think the substance was that the change wrought by the amendment would run for that period, not terminate the contract. But without having it in front of me, I cannot tell you that.
Okay. I'd be glad 100 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to get you a copy. Let's go back to the 1996 contract for a second and you'll have a chance to read over that one.
Attachment 1 to the 1996 contract, there's a section called "Member copayment." It reads: 2.50 for each employee or recent retiree. And for each optional retiree, the greater of percent or $5 for generic $10 11 for brand name. 12 That's in the '96 contract. 13
Did the 1997 15 contract reflect any change to the copay amount or 16 authorize any change in the copay amount? 17
But you did, in 20 fact, change the copay amount on January 11, 1998; is that correct?
Okay. Did you have a signed contract with the City on that date? 101 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
We had a signed letter from the City that indicated we should do that.
Did you have a signed contract with the City for that purpose?
Mr. Gurson, I don't want to argue law with you, but I'm sure you took a contracts class
Did you have the same kind of document that we've been going over for 1996, with a long list of terms and conditions of that contract, either for '96 or for '97? Did you have one that covered the time period starting January 1, 1998?
Because we formalized the letter which was legally binding when it was 102 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 signed in December.
Okay. So your position is that some series of letters starting somewhere either back in September of '97 or October of '97 leading through to December of '97 constitutes a contract.
Well, if you'd like me to, I could sign the letter the City sent us today, and I don't mean to be cute. The exchange of letters together signed by both parties, and I will--
One party sends a letter to one party saying, "We'd like you to do something," and you send a letter back saying, "We'll do it" or "It's okay" or whatever.
But from our earlier discussion, I think you and I would 103 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 generally agree that a contract is usually a document has the signatures of both parties on the same document on the same piece of paper.
Okay, all right. So your position is that you did, in fact, have authorization, on January 1, 1998, to institute --
My position is that after the City accepted our change, I had a legal obligation at that time to charge the $5 copay.
And that's what our position is, that we had a legal obligation as a result of these changes on the --
And the City accepted your change by writing you their acceptance of that proposition.
Yes, it is. 104 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. And is it your, I guess, standard legal practice to do it by way of letters back and forth between the parties, or do you just normally sign a contract like you did two days ago?
Sometimes I do it one way, and sometimes I do it another way.
Okay, but you wanted to make sure you had a signed legal contract before you came to this hearing today.
No, I would suggest City that the City presented that to us. We were prepared to go ahead as we were.
Okay. Tell me, in the contract or in the series of letters, what are the service standards that we should expect?
Sure. Can you point out to me in the contract or in the series of letters that you now refer to which you felt that you had a legal binding obligation to follow, can you tell me in this contract or the series of letters back and forth what the service standards 105 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 are that we, as public employees, should expect from Rite Aid?
The exchange of letters does not set forth service standards. And you, as employees of the City, should expect first-rate service from Rite Aid 'cause that's what we try to give all of our customers, whether they're City employees or cash customers.
Did the more detailed pharmacy services agreement that you signed in '96 with the City, did that have specific service standards? It talk about what public employees should expect from this contract with Rite Aid?
Well, it incorporated the request for proposal, which, I assume, had service standards. It obligates us to provide services in accordance with the plan. The letters that were exchanged merely extended the contract -- the contract continued on at the new rate. The letters that were exchanged just had to do with the rates that were to be paid in the year 1998 and the copay.
All right. Well, 106 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the only thing that I've been able to find that may come close to that is item number 2 in the '96 contract, obligations of Rite Aid. It seems that you are obligated to provide each member or eligible dependent with a prescription drug program and other services, as described in the RFP and as provided in Attachment 1, upon presentation by the member and identification card supplied to the member. I assume this is supposed to read "by the City." This doesn't read right. Rite Aid has the right to approve the form of the identification card and the information contained thereon. Can you tell me what these service standards are, either from this contract or from the RFP?
Well, from this contract, you can't tell, but it is -- I mean, from this contract, on the words, you can't tell. But it incorporates --
So there are no 24 service standards provisions in the contract.
No, that is not -- I 107 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 didn't say that. I said that you can't tell it from just looking at these pages of the contract because it is where it's supposed to provide prescriptions as described in the plan and the other services described in the RFP. So we have incorporated the RFP's requirement for services.
We give drug utilization review, we talk to them about drug interaction. The pharmacist is available to the customer to discuss the effects of drugs, talk to the doctor when --
You do this for every person that comes into the store?
Councilman Ortiz. 108 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I may have to leave for an appointment, but I have a series of questions along the lines. What is the entry-level wage for a Rite Aid employee?
For entry level, you mean at the lowest level? It's cents above the 8 minimum wage per hour, the minimum per-hour wage. 9
What is that right 10 now? I forget what it is. I know that the federal law changed it.
And what -- and what constitutes part-time and not part-time?
Working more than half a week. 109 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
More than half a week. And what percentage of your employees work more than after a week?
Councilman, I may be a little better equipped to answer that.
Please identify yourself for the record, and get that microphone maybe a little closer to you.
My name's Ed Hushen. I'm the Regional Market Manager here in Philadelphia. And our members are part of Local 1776. So the clerical people, other than the pharmacy manager and the store managers, are members of a bargaining unit, and they're --
Other than our pharmacy manager and our store manager and our assistant manager, our members are members of the bargaining unit, so their salaries are scaled, based on length of service. And employees -- part-time employees are eligible for benefits, I believe, after 90 days, for themselves. "Part-time" is defined as 110 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 anybody working less than 35 hours. Full-time employees are entitled to benefits for themselves and their dependents, based on need. They can -- anybody that is in that unit gets -- goes through the benefit program through 1776.
And do they pay for those benefits? Or is there an employer contribution or a combination? How does that work?
I believe the members of the union do not; management do. I could get you a copy of the contract if you desire.
Okay. And I thought the Councilman was going to ask the -- can you give us any sense of the breakout between part-time and full-time.
It runs about 70/30; 70 percent part-time and 30 percent full-time.
Okay. Councilman 111 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Cohen.
Do you have any notion where that -- I -- I -- I -- you've got me stuttering, and not too much makes me stutter. But I can't understand a national company like Rite Aid having a majority of part-time employees. It begins to maybe clear some things in my mind 'cause I live very close to a Rite Aid that happened to be the linchpin of a community development -- not a community development, it was developed by private developers, but the community participated very much in the Champlost development on Broad and Champlost here in Philadelphia. And the community was very much interested in employment prospects, but they never, never had in mind temporary or part-time employment; they were interested in full-time jobs. And this is the first I've ever heard of any major company having -- other than McDonald's having that range of part-time -- you mean 70 percent of the employees are part-time 112 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 workers?
Could you tell us, why does that exist? You're a full-time company, you operate long hours all the time.
Right. And, generally, what it's designed to do is be able to provide the services when the public is shopping in the store. It's not designed to write a schedule in the store that can accommodate --
Well, I'll tell you, this store at Broad and Champlost is busy from the time it opens to the time it closes. It's probably the most profitable store you have in the City, from what I gather.
That store actually gets busier after 8 o'clock at night, and it's open till midnight.
It's a good store, isn't it, from a business point of view from the 113 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 range of customers?
Absolutely. And I'm hoping we have those safety caps for you now.
Yes. Because what we're looking to do is bring in additional people at 8 o'clock in the evening to work till midnight to cover the peak of business that happens at that period of time. There may be another peak during the day, maybe from 11 to 2, maybe when there's lunches, it may be busier, so we'll bring people in at 11 to 2.
Is that applicable to the pharmaceutical industry generally nationwide? Are there any studies made?
I would say that's probably pretty much retail, not necessarily the drugstore business, but pretty much anybody that is dealing with the public will generally try to have the most people working at the time when they are the busiest.
Does the union 114 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 agreement cover part-time as well as full-time?
With that one limitation that the benefits for part-time apply only to the individual worker?
While the full-time -- it just seems to me that with changes like that, there's an incentive to maintain a large-scale part-time force because it's cheaper for the company.
Well, it's more productive to running the store is actually why we do it. The larger the volume the store would have a greater number of full-time employees, but the ratio would probably remain the same.
It's 70/30. All right, Mr. Chairman, for the time being. Thank you.
No problem. How many Rite Aid stores were there in the City in 1992?
I believe approximately 50 or 60. 115 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Mr. Chairman. Excuse me, Mr. Chairman. I think I may, again, be better. Can you hear me? I'm sorry. I think in 1992, we had about 97 stores. There have been ups and downs over the last few years probably, which is our fiscal year 1999, which we are in now, we will probably end with 89 stores in Philadelphia County. We have 96 today.
How many did you have in '92? That was the question. I don't know how you could have less stores because you're opening stores in every zip code in the City. Something is not adding up.
Well, what we've been doing, Councilman, is opening and closing and relocating and consolidating. What we do is open one store, which is generally a bigger, larger store, and we may close two or three smaller stores and consolidate it 116 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 into one bigger lotion, so the net result pretty much remains static.
Right, but you've left the a little confused. How many stores did you have in 1992?
Well, how many stores have you built from 1992 to 1998?
We have probably relocated, expanded or built new probably about 20.
You mentioned that in some cases, you've closed your own stores?
That is correct. In many 117 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 case, we may have closed or three stores.
Right. How many independent pharmacies have you purchased in that time period?
In the time period from '92 to '98, you opened or expanded or built new 20 stores.
What did you do 118 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 with those stores?
We moved them into existing Rite Aid stores. We buy the prescription files.
All right. So let's not be as soft with the language. You buy an independent store, then you close it, correct?
So, in effect, what you've really done is maintained your level of stores, closed 60 other independent stores, moved all the prescriptions to your stores, the net of effect which really could be that you have 98 plus 60. The stenographer cannot record shrugs of shoulders. It's impossible.
Is that right? I mean, these are all the facts, right?
You could 119 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 effectively say that all of those stores -- you bought the stores.
But for net-net adding purposes, 98 plus 60 would incorporate the entire Rite Aid network. You just chose not to operate the 60 stores as stores because you consolidated them into your own locations with the prescriptions and the people, right?
But, Mr. Chairman, another way of looking at it would be that you just eliminated a lot of independent stores, and the physical locations available to people have been reduced, in the example you give, from maybe 156 or 158 to some 60 lower. Is that what you're saying? You found these big stores more successful and, I assume, more efficient, whatever standards you applied. But from the point of view of the public, you did what so many of us complained about CoreStates and First Union. You reduced the number of locations that people had available to them to get prescriptions filled. Is that right?
All right. I think we need that on the record. You know, there is in Philadelphia the overwhelming perception that there has been a huge increase in the number of Rite Aid stores. You'll 121 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 probably hear about that in the community meeting on June 1st up at the Eye Institute. That's the feeling widespread everywhere.
And they're going to find it very difficult to believe that the number of Rite Aid stores has remained the same.
Right. You know, I have to admit that I was quite honestly stunned at the numbers, which is why I was having some confusion. I mean, four new Rite Aids, built from the ground, in the past three or four years have been done just in the district that I represent. Those stores did not exist anywhere else. You didn't demolish something -- a pharmacy and put a store there. None of these stores existed before. So that's why, as Councilman Cohen says, there is a general perception that there is a huge number of new Rite Aid stores in the City.
There is some economic 122 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 activity for the City. We are an employer in --
The outlook of your company is to expand existing sites because, for some reason, whatever criteria you use, at least over the four-year period we're talking about, that's been the experience.
Existing sites have been expanded while 60 different locations have gone out of existence as sites where people could go to get prescriptions filled.
When you buy a store and then close it and shift the prescriptions over, what happens to the people who worked in those stores?
Sometimes the pharmacist comes to work for us, the employees are offered jobs if they want. They are -- sometimes it's an owner-operator who's looking to retire and has an asset that he want to capitalize on and he sells it to us and moves on. 123 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Do you have any data on what has actually happened in all of those cases?
Well, first of all, you have to understand, when we buy a pharmacy, this doesn't happen in a one-day process. We don't boy it and close it down the day we buy it and fire all of the people. We operate it in place for some period of time, sometimes longer, sometimes shorter, as we build the store into which we're going to put it. People are offered jobs, the pharmacists are offered jobs.
City Council, just so you know where we're coming from, we have a responsibility in this area, and we have power in different directions. Technically, frequently in the internal operation of government, one body, the executive and the legislative body, two separate bodies, often have disagreements. 124 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 One of the techniques used by the City Administration in Philadelphia to limit the ability of the City Council to make decisions is to have this system -- instead of a three-year contract, to have a one-year contract with options. Because in the Home Rule Charter, the City Administration is empowered to enter into one-year contracts. It has not yet been tested whether the City's theory is legal. At some point, probably in the next year or two, there will be a test. Now, the City Council has its own powers, which we have studying and considering. For example, when we ran into problems with SEPTA and felt that the SEPTA management was not being fully cooperative the City Council passed a transfer ordinance which took the money from the Public Property Department where usually the money is put, and the money was put into the City Council budget so that only City Council had the authorization to release it. There has been much talk, but maybe that's what we're going to have to do in the health area because there's just been such a cloak 125 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of mystery. Nobody has known. For example, apparently, the City Solicitor's office did not know about this amendment to a contract. Because, as I understand it, Councilman Nutter requested an opinion, and one would think the City's own Law Department would have known that there was a contract which in fact did not expire at the end of 1993, was it? And that this amendment existed. But the City Solicitor wrote an opinion totally unaware of this exchanges of letters. You know, I don't know whether that indicates internal intrigue in which the City Solicitor is kept ignorant of what the executive body is doing. But we're very much concerned because we're not so sure -- maybe it is good, but we're not so sure that it's good for people to have fewer locations to go to. We know, in the banking business, we think it's bad. And one of the terms before various groups in Philadelphia agreed to consider the integration and merger of First Union and CoreStates was to demand adequate banking sites. And so I think there is some questionable aspects to a policy of really taking 126 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 out these independent pharmacies and not substituting anything for them and resulting in fewer locations. There will be many other questions raised about the Rite Aid method of operation, which I'm waiting until -- you know, I expect most of them will be covered by Chairman Nutter. But if not, they will be covered by other Members of Council. So I'm just indicating we are very much concerned about this matter. And while we tried to cooperate with the City Administration and with Rite Aid, you know, and supported the contracts at the beginning, we feel we're kind of at a breaking point. We don't have answers to give to the constituents out in the community because it looks like it's been a "take-everything-give-nothing- back-to-the-community" philosophy that's motivated Rite Aid, and that's the kind of thing I think Rite Aid is, if it chooses to continue with the City of Philadelphia, I think you're going to have to deal with that.
Well, Mr. Chairman I would 127 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 only respectfully disagree with the statement that we give nothing back to the City and to your constituents and the other members of the Council's constituents. We open and operate clean, bright, well-lit stores, with easy access, in every zip code in this city. We do not choose wealthy neighborhoods or not-wealthy neighborhoods. We are where the people are, and we hire the people from the neighborhoods in which we operate. And we pay them a wage that is negotiated with their bargaining unit. Rite Aid Corporation gets much from this city, and Rite Aid Corporation believes it gives back to this city. We page wages, wages result in tax revenues for the City, we pay taxes in the City, and we provide service in every nook and cranny of this city.
Mr. Gurson, tell me, what were the total revenues for Rite Aid in Philadelphia in 1992?
I cannot give you that; I just do not know. I don't know what they were. I don't know what they were in Philadelphia in 1997 128 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 either.
Do you have any sense of whether the revenues in 1997 were greater than they were in 1992?
Could you also get us some information about the breakdown between your revenues generated by your pharmacy component, and then many of your stores have kind of everything else, all of the front-end-of- the-store stuff. I think your layout primarily dictates that you have to get through, you know, milk and candy and potato chips and cough medicine and all of that before you can actually get to the back with the pharmacist. So I'd be interested in a breakdown between those two. Nationwide, sales are up; is that correct?
Okay. What other 129 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 major employers in the City does Rite Aid have prescription plan business with?
Eagle Managed Care is a wholly-owned subsidiary of Rite Aid Corporation. It is, in fact, our pharmacy benefit managing arm.
What does that mean? What do you mean, it manages them? What does that mean?
Well, that's what Rite Aid does for you, for the City today, in this plan that you're having hearings about. The pharmacy benefit manager is a company that contracts with an employer or a group of employers to provide -- to put together a 130 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 network of pharmacies in which prescriptions of the members of that plan -- at which prescriptions of the members of that plan can be filled.
So they do all the billing and run the computer system?
Correct, correct. And that's either done on a capitated basis or a fee-for-service basis or some variation of the two.
Okay. And what does Capital Management Enterprises do and what's the nature of their relationship to either Eagle Managed Care or Rite Aid in this whole process?
They -- we -- I believe in the City's plan, they're a consultant to the City.
Well, I mean, there's some level of correspondence that seems to go back and forth between the two of you. I'm a little perplexed.
Capital Management Systems 131 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 is, to my knowledge, the City's consultant with respect to the plan that's the subject of the contract that we're talking about today net.
Okay, all right. Now, is it my understanding that -- 132 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Can I -- can I -- when I say -- I want to correct my answer in this sense and because I don't know the specific answer here. There are many times that a plan says I have a consultant. And as part of the contract, you must pay the fee that I am going to pay to my consultant or my broker. And that may be the case in the City plan, but I do not believe it is. I believe the City pays Capital Management System.
So your corrected answer is that you're not sure whether Rite Aid pays the consultant or not.
And is it a totally independent company, independent of Rite Aid?
Do we know who the principals are? Is it a small corporation, a larger one?
Well, it's not as large as 133 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Rite Aid but I don't know its exact size.
Very few people are as large as Rite Aid. Now, is it my understanding that -- this may be more appropriate for Miss Seyda. Given the --
Mr. Chairman, may I be excused just for a moment? I have to go to 319 for a meeting. And let me also say that Mr. Hushen has done an excellent job in west and southwest Philadelphia where we are, to try to represent Rite Aid well. And let me just finally say before I go down that as my staff member came in late -- I have a new staff attorney. And as fate or as God would have it, she came in on a cane and, believe it or not, has the same condition that the City 134 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 employee has and takes the same medicine and has the same prescribed treatment, period. It is absolutely unbelievable. And when I asked her about her medication, thank God, her husband's on a plan and it's just mailed to her. But she doesn't have to, thank God, rely on the City so that she gets the treatment that she needs. So I have even an added interest because, apparently, the body of people who need this are more than we way know.
Miss Seyda, can we ask that you -- well, I guess there's technically no need to look into Councilmember Blackwell's staff person's situation, but I think it further exemplifies some need for resolution to this problem.
Mr. Chairman, before we go further with Miss Seyda, on Eagle Management, are they the ones that control the stock inventory?
Does Eagle Management control the pharmaceuticals? 135 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Because in the Champlost store, it is quite common to be told, Well, we don't have it, you have to go to another Rite Aid store. And you ask, What Rite Aid store? Well, we don't know, we don't know who has it, but we feel confident some Rite Aid store has it. It's also a very common practice to get a partial prescription filled in the sense that, say, you're supposed to get 50 or 60, you may get 15 or 20, and you're given a slip. And if you come back next week, we will have the others. I had never before, until this Rite Aid came to Champlost, ever run into that in a pharmaceutical place on standard things that doctors were prescribing. But someone, whoever's running it maintains the lowest inventory I've ever seen. It is a very common practice. It happened to me any number of times. And as I wait there, I hear folks behind the counter explaining 136 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to folks that come, saying, We don't have this in stock in this store, we'll have it next week. And I think Thursday is an ordering day or the day in which orders come in in that location. So I just wondered, where is that responsibility? I just can't understand why that happens. Then always, there is a long wait for a prescription.
And I don't know whether it's for the purpose of having people wander through these candy aisles. It's a very attractive setup.
Very attractive, even though the doctor says to stay away from them. You know, they are particularly for women that have kids who have a great time, you know, roaming through the aisles and finding things to buy. At some point, I think we would like to raise those kind of issues because we think your stores ought to be well-stocked with the 137 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 traditional medicines that ought never to be necessary for anybody to have to go to another store. And this is one of your major stores.
Sometimes one of your people will say, Well, we think the Cheltenham store will have it, something of that sort. In one case, I had to send someone into North Philly to get a prescription for myself. Now, I live up in West Oak Lane, about three, four miles from North Philadelphia. But no other stores seemed to have it. But he went through a number of other by telephone, calling to see if they had it. Finally, one store that's located in North Philadelphia had it. And I was just wondering, there didn't seem to be anybody responsible for management of those items.
That is the responsibility of the pharmacy department manager in that particular store, and that is probably not an uncommon complaint. And what we are trying to do or what we 138 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 are in the process of implementing is an automatic replenishment system in the pharmacy department where, in essence, what we would have at any given time is an actual on-hand perpetual inventory that will automatically be replenished based on a dispensing formula. So that if somebody comes in and has a prescription filled for 50, it will actually replace that 50, and the pharmacy manager or the pharmacy technician won't have to do anything other than maintain the system. Unfortunately, you're dealing with people. Some are better than others. And there are times when, in that particular location, after our last conversation, that gentleman was spoken to because he, in fact, was not ordering properly. And that's --
Well, I can just say that when I discussed it with others, it seems to be a fairly common complaint. I'm told, "You haven't heard anything yet, let me tell you what my experience was with Rite Aid." And that's the kind of thing I'm running into all over the City. 139 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And I just think you ought to be -- somebody ought to be really paying attention to that kind of situation.
As Mr. Hushen pointed out, we're not only paying attention to it, but we're spending a lot of money to try to get computers to develop the computer system and the data base which allows you to know what has been ordered and in quantity. But you can't just put it in; you have to develop the software and then put the information in. But it is a problem, it's a problem work on all the time.
Well, I think one of the problems is the huge turnover of people behind who -- you know, they seem to be very nice folks. You know, they want to be of service. But no matter how many times you've been there, you are a new person to them, and you have to go through many questions asking you, "Have you ever been here before?" you know, when you've been maybe a regular customer. I don't know what the salary is. Are they covered by the union contract too? 140 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Well, you might want to look at the salary range you're paying them. I mean, that may be part of the problem of the turnover. I just don't understand the constant turnover.
In some cases, it may not be turnover. They may be working for Rite Aid at another store; they're just not in that same store all the time. Our best-case scenario is to get two people to work the same store. And that particular store where you are is open a little bit longer, so it generally has -- it's open 16 hours a day. So we'll have -- you can't ask someone to work that one-day shift. It's too long. So you may see more people and --
No, but could you 141 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 have, say, to use your figure of 2, couldn't you have people -- assigned during day shift, 2 4 assigned during the night shift on a kind of a regular basis; even 2 more for the weekends or extra hours? Whatever it is, couldn't they tend to be -- people don't just leave. Why would Rite Aid take somebody from one store and put them in another store? Why don't they just stay in the one store and get to know the people? I think, from your end, it would be much better. And from the community end, it certainly would be much better.
Well, let me make comment, and then Councilwoman Tasco wants to ask a question. I would have to add to Councilman Cohen. And with all due respect to the Rite Aid individuals, my personal experience has been that your service in many of your stores, at least in West Philadelphia is pretty sorry. I have had numerous personal 142 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 experiences with -- and you can update your systems, and I commend you for spending the dollars to get additional computers and backups and make sure that items are in stock. But all the computers in the world will not rectify problems of people not thinking. If they don't think well -- you can have all the computer systems in the world -- the stores still won't run right. And some of that comes down to good old-fashioned training and common sense, and we'll have some further discussion about that. But Councilwoman Tasco has a question.
Well, I guess I was listening partially upstairs on my box and I had to come down too because I am deeply distressed with the quality of service that I particularly have experienced also, particularly during the Christmas holidays when a very good friend of mine was very ill. And what Councilman Cohen said about the how you go to one store and they don't have the prescription. They didn't for me look in the computer to find out where I could go. 143 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
They didn't have a list of any of the other Rite Aids in the neighborhood where I could go. And I wanted to know where I could find this prescription. And it was, "Well, maybe you can get it over someplace else." I said, "Well, where is that?" And it was, "Well, I don't know." So if I didn't have a phone to get through information, I couldn't find the store. Didn't know -- it was a hours, it was 12:30 13 a.m. in the morning, so all of the stores are not 14 open, they didn't know what stores were open and 15 what area they were open in, didn't have a list of 16 the stores. 17 And when I got to the store in 18 Roxborough, they didn't have the prescription. I 19 had to take a generic medicine, which the doctor 20 did not want. The doctor wanted me to have the 21 prescription in the name, so it was very 22 frustrating in dealing with them, and I dealt with 23 them for about three or four weeks. And the 24 experience, I will tell you, was not very pleasant. 144 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And Councilwoman Clark is not here, but I will relay the story she had with her mother at the same time because we were collaborating on this. The Rite Aid around the corner had the prescription her mother needed. Her mother was not in the computer system. A Rite Aid may be in, say, Roxborough, had her name in the computer but didn't have the medication. But this Rite Aid around the corner from her would not give her the medication. And so there was just no coordination that this store over here could say, Okay, she's in the computer, she has an okay, a plan, it's approved, you can give her the medication. Because it wasn't at Tenth and Oxford, or wherever this store is near Councilwoman Clark, she was on the phone all day with your Harrisburg office, trying to get her mother a prescription, which doesn't make sense. You've got to do a better job of finding -- being able to tell a customer that we don't have the prescription here, but you can go to -- it's over across town. Or it's at Broad and 145 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Olney, or it's at Stenton Avenue. I don't want to have to go to five Rite Aids in my neighborhood.
Or, Councilwoman, how about this novel concept? How about they'll actually get it at the store where you are so you can get it there.
How about that for a notion? That they'll figure out where it's at, go get the medicine or have it delivered from their other store to your location?
Right. Since you have the monopoly on providing service to the City, I want better service. It was just incomprehensible what I went through during the holidays trying to get this medication. It just didn't make sense.
Well, I won't bore you with my horror story of running around in the middle of the night to four of your different stores 'cause none of them could talk to each other.
None of them -- 146 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 you're right, they can't talk to each other. And none of them had the prescription; it was always a generic brand, which is not a brand; it was generic medicine.
Right. Who do people talk to about these kinds or problems? Do you have a customer service number, do you have someone on the ground here in Philadelphia that, if a public employee has a concern or a complaint about service, who do they talk to?
Is that on our cards? Where would we find that material?
We provide that information to employees. It was -- that information was included in the information that went out to the employees during the open-enrollment period.
That's correct. And, I mean, obviously, from these hearings today, it's clear that not enough of that information -- that information isn't getting out to employees the way 147 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 it should be getting out to them. I mean, that's very clear to me from what I've heard today.
Let me ask this question: Mr. Gurson, you very generously offered the 1-800-number. Is that the same as 1-800-545-5591?
No, no, I mean a key pad to see if what the numbers correspond to.
Has Rite Aid Pharmacy Card Incorporated gone out of business?
I think it's fair to say that it's operations are -- it's operations are part of Eagle.
That's -- that's Councilman Cohen still carrying around one of the 148 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 original cards. I think that's going to the Smithsonian. Let me tell you what the Eagle Managed Care card says. It says, "If you have any questions or problems with processing a prescription under this program, please call our customer service department, at 1-800-545-5591, during normal operating hours. Is that a 9-to-5 number?
I believe it's open longer than 9 to 5 but I do not know the precise hours.
So if I had a problem at 9 o'clock at night, I could call this number and talk to somebody?
Mr. Hushen has advised me that he believes it's open hours. 22
Okay. And what are 23 they going to do when I call that number and tell 24 them I've been four to stores and none of them have what I'm looking for? What are they going to 149 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 do?
They're going to come at o'clock at night and get my prescription 7 for me? Is that what they're going to do? 8
Not to be facetious, 9 they're going to try their best to help you solve the problem for you. No matter what the problem is, they're going to tell Councilwoman Clark or anybody else where the closer Rite Aid is or the other Rite Aid is.
Well, in the Councilwoman Clark example, she had to personally spend her time talking to Harrisburg. That's your corporate headquarters, Camp Hill, Harrisburg, PA?
Right. They spent all day; they couldn't resolve it. And she's a member of City Council. What's a person in the Recreation Department going to do? Are you guys going to spend all day on the phone with them?
We will do everything we 150 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 can to solve any customer's problem.
Is there a local person here that, when we have problems or complaints, since you have a contract with us and our 8,000-and-some employees directly and possibly indirectly thousands of others, who do we talk to?
Is Mr. Hushen's name going to go on the new set of cards that go out?
Councilman, Councilman, with due respect, uh, we run a 24-hour-a-day customer service line. We try our best. I will not sit here and tell you or anybody else that we solve every problem or that we do everything correctly. But we manage an enormous number of lives for the City and for others, and we provide first-quality service. These are instances which I wish we did not have to hear about 'cause, frankly, we don't make money because we don't do it well every time. We always do it -- make better money if we 151 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 do it well every time. We're not happy to hear of these instance. We wish they didn't occur. But we run a large organization with people, and people, as you pointed, out make mistakes and don't always do what they're trained to do or what they're supposed to do.
I think this is a question about training. And, again, I will say it's just a question sometimes of good old common sense. We all have these situations apparently or our staffs or our constituents, and some of this stuff just doesn't make any sense. In my particular case, no one offered me any help or support. And, as Councilwoman Tasco said, none of them knew where the next store was, none of them offered to call any of those stores to figure out if they had the particular prescription that I needed. And I ended up going to a non-Rite Aid store because someone there was willing to help me. Now, I subsequently sent you guys the bill and did get reimbursed, but I had to do it all on my own at 8, 9, 10 o'clock at night. And the 1-800 number was of no assistance whatsoever, 152 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 and I didn't know Mr. Hushen at the time, but I shouldn't have to call him.
And the people working in your drugstores didn't know where the other stores were and didn't have the common decency to offer to find out how to solve the problem. That's what customer service is, in my mind. Did you ever work in a drugstore?
I did. I know a little bit about customer service in a drugstore, and I was totally dissatisfied with your customer service on a personal level, not because I'm a member of Council but because I know about what's going on in a drugstore. So you can have all the computer systems you want. If the folks don't have enough common sense to look on a sheet and call someone else at the location where a customer needs it, then you can't serve us, you just can't do it. 153 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And aren't you the largest chain drugstore in the country when all acquisitions are over?
I think they're right there. Or if not, they're right on the edge.
We are close. Walgreen's has larger gross sales and I believe that CVS does also.
Miss Seyda, let me ask this question: Is there going to be an RFP for a prescription drug plan for the City?
That remains to be seen. As you corrected me earlier this morning, there was a provision for three renewals so that there will either be a renewal --
Well, are we operating under the '96 contract or are we 154 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 operating under the contract that was signed two days ago? Because that seems to expire on December 31, 1998.
And then when we -- during the course of these hearings, when we looked back at the basic contract, it provides for -- and I stand corrected -- three renewals at the option of the City. We are in the second one now.
Why do we keep doing these one-year contracts with multiple renewals? Why don't we just have a long-term contract between the provider and the City of Philadelphia? And what were the service standards at the time of the RFP, back in 1995?
There are a couple of questions, and there are, hopefully, a couple of answers.
In terms of -- I don't know 155 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the answer to -- I don't have the answer to your question in terms of why we did not have a long-term contract as opposed to a one-year contract with renewals. I have to get the answer for that question for you. I do not have the answer to that question.
Was Rite Aid opposed to signing a long-term contract with us?
I do not have the answer to that question; I will provide you with the answer.
Are you opposed to signing a longer-term contract than one year, with multiple renewals with the City of Philadelphia should you decide to respond to a potential RFP in the future?
That would depend on -- we have no policy that says that we won't have more than one-year contracts, if that's your question, but I can't tell you that we will sign a long-term contract with anybody on any basis. It depends on the proposal.
Well, you essentially have had a long-term contract with us. 156 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 You signed a contract for one year with three multiple renewals.
Well, that's -- we have that with the City, yes. And the City has the option to terminate it.
Would it have been any difference to you that it was a four-year contract at that time? Same terms and conditions? It's only renewable at our option.
The rates change because we've built in a per-month per-member rate escalator, which you've taken full advantage of every year, right?
On that basis, I would say to you that if the economics were the same, we wouldn't object to it, no. 19
Okay. What are our service standards for this contract? What do we require to be provided to the public employees by way of service, by way of conditions, by way of equipment, by way of response?
The service requirements for Rite Aid would be those as were discussed by 157 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the representatives from Rite Aid. Clearly, it is appropriate for us to better define what those service standards should be and to incorporate them into our agreements with the provider.
So you anticipate laying them out should there be an RFP in the RFP?
I would anticipate laying them out in any case. Whether there's an RFP or there is another one-year renewal, I believe it would still be appropriate for us to do that.
Well, since there are -- since the general counsel takes a position that letters back and forth constitute legal and binding obligations, couldn't the City send a letter to Rite Aid requesting right now certain service standard for the contract that they have, whether it was the contract is authorized back in the flow of letters in late '97 or the contract that was authorized two days ago? We could create service standards tomorrow and send them a letter and say that we want all of your stores to provide X for public employees, and we expect certain things from the 158 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Rite Aid Corporation in terms of providing service to the City of Philadelphia. That letter could go to them, and they would have the option to respond or not to respond, isn't that correct? Since we've already demonstrated our ability to do that?
Okay. Miss Seyda, I would like for you, as a representative from the City Administration, to begin a process and a series of discussions about what the service standards should be for this particular contract between the City and its public employees and the Rite Aid Corporation.
Thank you. Let me ask you about the stores. Do all the stores have a fax machine?
Is that part of the new technological upgrade you expect to have going forward? Why doesn't every store have a fax machine?
Well, that's -- 159 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
At this point in time, fax machines are relatively inexpensive.
A matter of usage. Would physicians, or whoever, fax information back and forth? The newer models --
They might fax it to you if they knew you had a fax machine. Or the employee getting the prescription might fax it to you if they knew you had a fax machine 'cause they could fax it to you in the daytime while at work and would expect to possibly be able to pick up their prescription when they came home.
It's not something we've done. 160 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. Does every store have a list of all the other stores and their hours of operation and their location? You should.
Most have a list of all of the other stores and their phone numbers.
Does every store have a phone book? I mean, why do I have to -- I mean, come on, Mr. Gurson, let's be serious. I walk into one of your stores, I talk to one of your pharmacists or a manager or something and they tell me they don't know where their stores are but I can go look in a phone book?
No, that's not what I was trying to imply at all, sir. It is in our interests to make the locations of our pharmacies very well known. 161 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I can only BUT apologize for the people who treat you rudely or badly, but my answer to your question is --
No, let me say this: They're generally never rude, they generally never treat you badly. They just don't know what to do. They don't think. So I'm not complaining that they're rude or mean or nasty or anything. They just have no answers and don't go the next step.
So the stores today at least have a list of all the other stores and where they are. They don't necessarily know the hours of operation. So if I've got a prescription problem, and the person could tell me legitimately, You could go to X Y Z store, they just don't know if they're open or not.
You could also -- and I 162 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 don't offer this to you as a substitute because I would prefer that they would be able to tell you what time the store is open or if it was open at the time you needed it to be open.
You could also call our 1-800 number, which would give you that information.
Let me ask you this question: Is it a part of their training and protocol that if there's an out-of-stock item, that they will call the next closest store to see if that store has the item in stock and try to get it at the location where the customer is, as opposed to sending the customer to chase after it? What is the protocol for that?
That would be the best-case scenario, that is ideally what would -- 163 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I didn't ask you that question. I said, what's the protocol.
The protocol is they should call the next closest store to see if have it in stock.
Well, what they're trained to do and what they actually do do sometimes are two different things. They are trained to call the next store to see if it's available.
Okay. Based on some of issues that have been raised in this hearing, and I've asked Miss Seyda to go back and take a look at some service standard issues. Were you aware of many of things that have been raised here today, Mr. Hushen? You have the benefit of you and I and a few other people having a meeting not too long ago, so you've heard about some of my issues. Mr. Gurson didn't have the same pleasurable 164 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 opportunity. But are these common complaints? Have you heard these things before?
Specifically within Philadelphia or generally? The answer to your question is, we run --
All right. The answer to your question is we run approximately 4,000 stores. We have -- we do not run any one or all of them perfectly all of the time, and that's why have customer service lines, and that's why we try to train our people to do the right thing. We have the same problems that any business of any size has. Everything is not done absolutely correctly in the eyes of every customer every time.
Well, I understand that and I appreciate that, but I guess my question is: If you've heard about these things in the past, what steps have you taken to either try to rectify them or send out directives and the like? 165 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 For instance, I had occasion to go to a store here in Center City pretty, a prominent location, does a lot of business, a lot of traffic. You happened not to have the generic brand of whatever the thing is I needed that particular day. I'm okay with generics, I happen to believe they are absolutely the same medicine, but it's all right. You didn't have the generic. You decided to give me the brand and charge me for it, and your folks couldn't figure out that that wasn't my problem. I ended up paying for the medicine at the rate -- I wasn't going to get into a big argument with the person at the store. Subsequently, and again, this is before I met Mr. Hushen, so the only person I was left to talk to was Manny Stamatakis, who contacted the operation. They did process a refund. And then a memo went out explaining to the people that if you're out of stock of the generic, give the person the brand and eat the cost. That kind of seemed like a rather common-sensical store manager decision right on the spot. Why should I have to suffer as a result 166 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of an out-of-stock item?
Lastly, let me ask you, with all the stores, especially with the new growth and development, do you have any particular policy as it relates to construction or employment by way of minority enterprises or women enterprises or disadvantaged businesses?
We do business with anybody, whether they're short or tall, whatever color they are, we do business with them. 167 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. Can you provide me with any information on what the results of this open-ended, short/tall, any-color policy has resulted in? How many black contractors have worked in stores or built stores for Rite Aid?
We will look into that and I will try to provide you with that information.
We have a variety of minority general contractors that we could provide you. In order to get the subcontractors from the GC's that we do use, we would have to solicit that information from them.
If you built 168 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 x-number of stores or expanded x-number of stores, tell me by store who worked on those places and some identifying remarks regarding the demographics of that population, okay?
Do you use minority general contractors in other areas outside of minority communities, or do you just use minority contractors in the minority communities? If you're going to build a Rite Aid at Broad and Champlost or Spencer and Broad, you would probably make sure that there's a general contractor, a minority general contractor there. But if you're going to do in one, say, in the Northeast, what would be your commitment to minority participation?
Minority, non-minority are all invited. 169 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I just want to go back to providing the service. As a result of our concerns raised today, do you plan to -- when you try to improve your computer system, do you plan to provide the computers the capacity -- a program so that they can talk to each other? So that if I go in one Rite Aid and they don't have it, then maybe the clerk or the pharmacist can look on the computer and find out which store might have the medication?
I don't know if we're doing that, but I would hope that, as Chairman Nutter pointed out, that they would use that low technology, the telephone, and pick it up and call the store that was closest by.
Miss Seyda, if I can ask, separate from my request for service standard development, can you get out some additional information directly to all of our public employees about customer service contact issues -- obviously, if it goes out now, it's not a part of the larger open-enrollment information -- or some other communication to public employees about customer-service issues, complaints, 170 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 problems resolution and the like, as it relates to the Rite Aid program.
And at the same time for Mr. Gurson -- it's "Gurson," right?
Mr. Gurson and Mr. Hushen. Apparently Eagle just sent out cards not too long ago. Could you at least just give some additional thought to how you might communicate with our public employees as well about these issues of customer service. You seem to be aware that on the card where it says you can call the number during normal operating hours, that might leave the average person to think normal operating hours are either general hours of the store or could be 9 to 5. If you have some additional information or if you can make people generally aware that you run a 24-hour hotline network, that would also be helpful. I would also be interested at a later point in time if you do send out additional 171 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 directives, changes in protocol and the like for customer-service issues either because of things you've heard in the past or anything that you might have picked up in today's hearing, I certainly would be interested in any of those changes in policy for some of these customer-service, customer-driven, customer-complaint issues. Is that possible? Again, the stenographer capital pick up nods. The stenographer cannot translate a nod on the record.
Thank you. Lastly, Miss Seyda, how do we communicate to public employees about the non-Rite Aid pharmacies that participate in the City program? Is there an updated list that gets distributed to all the public employees so they know not only where the Rite Aid stores are but also the independent pharmacies that participate in the program?
We recently received and have available an updated copy of all of the pharmacies, both Rite Aid pharmacies and 172 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 independent pharmacies, that are participating in the City's program. We have a new list available as of April of this year, and we will certainly ensure that that information is communicated to the City workforce.
And do you have a sense of -- I mean, if we have 96 or so Rite Aid stores operating in the City, do you have a ballpark figure on how many independents are participating in the program?
Yes. On the current list that I have from the April listing, I believe that there are over 200 independent pharmacies that participate in the City's program in addition to about 150 Rite Aid stores in Philadelphia and in the adjacent suburbs.
Mr. Gurson, you seem like you enthusiastically wanted to report something.
No, I was -- just had the same numbers, and I was going to provide them to you.
All right, great. I think at this point what I'd like to 173 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 do is have Mr. Brog, from the independent pharmacists, come up to the witness table. I would like to ask Miss Seyda, Mr. Gurson, and Mr. Hushen, if you could, to at least remain here in the chamber. Other issues may arise, and I would prefer to be able to have your response rather than speculate on what you might say. I appreciate your testimony and your responses to the questions. Miss Seyda, you don't have to respond right now, but the issue was raised earlier about this consultancy relationship and who pays. I believe this was in the capital enterprises matter. Rite Aid seemed to not be clear or absolutely sure who's paying for what, and if you could provide that information, I would great greatly appreciate it.
Mr. Brog. Please identify yourself for the record and you can 174 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 proceed.
Sure. I just wanted to get my notes together. Excuse me for a moment.
I guess I'll say good afternoon, Councilman Nutter. And I'll read my statement, and then I would like to bring up some of the questions that were asked back and forth here to see if we can get some of the answers you requested but never really got. I might be of some help in that respect. I am Sam Brog, pharmacist and past co-owner of Brog Pharmacy, in Philadelphia, Pennsylvania, from 1952 to 1996. I served as Chairman of the Drug Utilization Review Committee for the Department of Public Welfare. " 175 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. " I represent 291 independent pharmacies. I was asked to testify in regards to the City of Philadelphia and the Rite Aid Corporation prescription drug program for all City employees. The impact of this program has been a contributing factor in the closing of approximately 140 independent pharmacies in the past two years. In 1993, the Rite Aid/Eagle Managed Care prescription plan originally was closed to the independent pharmacies except for a few to fill in the voids in the network. Then, I believe, in 1996, the City and Rite Aid agreed to accept the independents. The current reimbursement rates for PARD members is what they call the average wholesale price minus 15 percent -- it's a discounted price. 25 for brand and generics per prescription. The fee is to pay for the pharmacists technicians, and other overhead expenses such as heat, light, prescription 176 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 containers, computer transmission charges, and a profit. In 1988, Rite Aid did a study on the cost of filling a prescription. 25. 65. What is it today? We will know very shortly. The Department of Public Welfare and the PACE, a prescription program for the elderly, will release figures on their recent study. 25 must be increased for pharmacies to continue in the program. Let's get back to the 140 independents closing and more to follow. S. Healthcare and Independent Blue Cross. The chains have negotiated better deals. The independents, due to antitrust violations, cannot as a group negotiate fees. The Department of Public Welfare initiated February 1, 1997 a Health Choices 177 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 managed care program for all Medicaid recipients in the five-county region: Philadelphia, Montgomery County, Chester, Delaware, and Bucks County. There are four HMOs involved. Two out of the four have contracted with Eagle Managed Care, a wholly-owned subsidiary of Rite Aid Incorporated. As I said earlier, Eagle is a PBM owned by Rite Aid. Keystone Mercy contracted with Eagle as their PBM, setting many prices below our acquisition cost -- in some cases, up to $10 or more below our cost. Eckerd and CVS will not participate due to the low reimbursements. Who is left? Rite Aid versus the independents. Who will survive? A pharmacy cannot dispense a prescription if he is losing money on the cost of the drug. The Department of Public Welfare has been notified. I have sent documentation to them, also to the attorney general and the auditor general. Nothing has been done as of today. Councilman Nutter is the only one I know of that is attempting to help the independents that are left to stay in business. 178 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 The independents pay City taxes of all types, employ people from their communities, are active in their community, and care for the patients as if they were family. Rite Aid will soon have no competition if this is not stopped and will dictate, as they are in the City plan, what reimbursements should be. The solution to the Department of Public Welfare dilemma Health Choices, which, by the way, will soon be initiated in the southwest region of Pennsylvania. The program is eventually to take over the entire state. If our government, City, State, and federal does not step in to curb this action, there will be no independent pharmacies left in the state of Pennsylvania and the loss of quality care provided by them.
A solution to this problem sits in the Pennsylvania Senate, Senate Bill 100, which passed in the house with amendments, 193 to 5. This occurred just about two or three weeks ago. Senate Bill 100 is a bill to protect the consumer from HMOs using tactics to cut down on health care. You all know what I am talking about. We need your support in asking your 179 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 senator to support Senate Bill 100 with carve-out amendments, yes, to carve pharmacy services out of Medicaid managed care and place it back on fee for service administered by the Department of Public Welfare. If you want to keep what we have left of the independents, please help us. We all make mistakes and we should learn by them. You and your families deserve the best health care available. The Philadelphia economy prescription plan should be open for bid with a new RFP, not an at-risk basis but on a per-claim basis. And we have some pharmacy excellent pharmacy benefit managers that can administer your program. All pharmacies, chain and independent, should be able to participate. Bring back the freedom of choice. In choosing a PBM, choose one not owned or connected in any way with a drugstore chain or drug manufacturer. There is a definite conflict of interest, and they do not look out for your best interests. You deserve the best. Thank you.
Thank you very 180 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 much, Mr. Brog. I want to take you back to a part of your testimony in an area that I'd like to explore with you, and then I'm sure we have to get some response from Rite Aid. On of your testimony, you talked about the dispensing fee. First you started telling us about the reimbursement rate for the PARD members at AWP minus 15, which, I may have heard, may also be possibly changing to AWP minus 16, but we'll talk about that later. Then you say that the dispensing fee is currently $1.25 for brand and generics per prescription. Can you explain exactly what that means? The copay is $5 presently. Are you saying that the independent pharmacists dispensing the medicine gets to keep $1.25 of that copay as a dispensing fee?
No. The printout that is sent to the pharmacies from Eagle Managed Care shows, you know, the prescription number, the patient, so forth, the drug, or the indice code of the drug and the quantity dispensed and so on and so forth. And what they will pay you -- what Eagle will pay, okay, less the $5 copay that you 181 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 took from the patient, okay, plus a $1.25 fee. So the $5 is actually deducted from the cost of the drug. We don't keep the $5.
Well, where does the $5 go? I mean, you take the $5 in, what happens to it?
Well, Eagle Managed Care, the subsidiary wholly-owned company of Rite Aid, they keep it. I thought the City got it back to defray your costs. But at this point, I'm a little confused and I have other questions. I don't really know where the $5 goes, do you? Do you know? Does the City get it?
It goes to the 182 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 person's whose hand I put it in. I don't know what they do with it after that, other than put in the cash register. I have no idea where the $5 goes.
Well, the then the $5 must remain with the Eagle Managed Care or Rite Aid.
Well, based on their earlier discussion, though, part of the reason for the copay increase, if I'm remembering from a couple hours ago, was to help offset some of the per-member per-month cost that the City was paying. So there's obviously some connection between the copay amount and the per-month per-employee that the City pays. I don't know where the $5 ultimately ends up, but you just get $1 -- 18
But now, I thought 23 I also understood -- or maybe that's only for the 24 retirees -- that after the four years that there 25 was a difference in the copay amount based on 183 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 whether it was a brand or there was -- this is that formula: the greater of percent of the 4 cost or $5 for brand -- I'm sorry -- $5 for 5 generic, $10 for brand. 6 And so why is the $1.25 dispensing fee 7 a problem? 8
It's inadequate. A pharmacy 9 can't survive with a $1.25 fee to cover the costs 10 of the overhead costs, the salaries, the taxes, 11 and so forth and so on. It's inadequate. 12 And based upon, you know, a couple 13 studies that goes back a few years, which I so 14 stated, even a Rite Aid study of their own stores, 15 in 1988, which is, you know, ten years ago, their 16 studies showed that it cost them $5.25 to fill a 17 prescription in 1988. So how can it -- how can we 18 fill a prescription and receive the $1.25 when -- 19
Well, let me ask 20 you this question: Do you know, of the prescriptions that get filled, there was a discussion earlier about what the City employees' utilization was, and I think we figured out that if it is average that two prescriptions per month, and there are approximately 9,000 employees times 184 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 $5 times 12, that comes to a $1,080,000. Do you have any information on the breakdown between the number the prescriptions filled by Rite Aid versus the number of prescriptions filled by independent pharmacists?
No, I wouldn't have that. I know that there is a listing of pharmacies that signed up to participate, okay. I never signed up to participate in that plan at that amount.
Even though they signed up, it doesn't mean that they're filling the prescriptions, that's another thing. You ought to find out what percentage of that list are actually filled by the independents not just because they signed up.
Exactly. Well, that's kind of where that whole question is going for me.
Right. You had some other issues I think you either raised in your testimony or you indicated you had some 185 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 answers on.
Yes, I had a few here. Let's see, I made some notes. Mr. Volpe, who was sitting here before, mentioned something about modifying a plan which you couldn't understand yourself. I think you questioned him about it.
That was the people who have retired and after four years, have to pay a per-person.
Well, as far as Mr. Volpe is concerned, I feel that you need a new plan. I don't think modifying this plan will -- I think you'll spend three more years trying to modify it. I think you ought to start from scratch and do what should have been done in 1992 or whenever.
'93, whenever this situation came up. And that is to put it out on bid and do it properly and get a reputable PBM to bid on it and so forth and so on. The other thing is the questions and the problems that you have with getting your medication. Each and every HMO has a grievance 186 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 committee where they can go before and, you know, present your case. I mean, if the City contacted with Rite Aid and the City has grievances, you don't know where to go. So from what I hear here, they don't have -- they didn't set up a grievance situation or a department or wherever someone can go and complain.
Right. In the HMO example that you laid out, I mean --
Yes, there's a methodology in the Medicaid arena, for instance. If the HMO has to do it within so many days, has to -- if you have a complaint, has to answer you within so many days. It's all spelled out. And if you don't get satisfaction from them, you go to the Department of Public Welfare. I mean there's a step-by-step methodology of how you can get your complaint or grievance, you know, understood and perhaps maybe get some help.
Okay. 187 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
The RFPs, am I correct in stating that they are from 1995, the RFPs that --
Okay. 'Cause I don't want to quote anything if it's out of date or anything of that nature.
As I recall, that's when the network opened up to a larger group of independents.
From what I read or read in the RFPs, and I didn't understand here in this questioning prior to me coming up here, the way I understand it or understood in reading the RFPs, you have a capitated program plan with the City and Rite Aid. The only time the fee for service came into being is when they opened it up to the independents. And that is the only fee for service that I know of. You're still paying a capitation each month to Rite Aid. Well, then it's not fee for 188 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 service. But then later on I hear, Oh, this is a fee-for-service plan. So what are you doing, paying them the capitation and also they bill you for each prescription. And how much are they billing you? So to me, I don't believe that Rite Aid is on a fee for service with the City. I think they're still capitated, and the only portion that isn't are the independent pharmacies. That's fee for service, the $1.25 is fee for service.
Someone also made a statement here that the copay of $5 -- somebody did say $4.30 went to the City to reduce the City's costs. Well I don't know if that's true. I mean, if the City's getting $4.30, then there's 70 cents left. Where does that go?
Yeah, we can ask that question. My understanding of that response was that the increase from 2.50 to $5 would allow our per-month per-employee amount to be reduced from the original request of 69.30, which was a 10 percent increase over the $63 that we paid in 1997, that they would recalculate the PM/PM back 189 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to $65 because they were going to cut it by the $4.30.
Well, that is if -- okay, if you keep the $5, if you get it, then it's fine, then it makes sense, if you receive it to help defray your costs, but I don't know whether you're getting it.
Right. For the moment, we don't know if that's the actual answer to the question of this financial transaction.
And also in reading over your information that you sent out in the mailing, you never told when they're going to increase the copayments. I mean, there's never a meeting with the City or a discussion back and forth and why are their costs going up and so forth. If they're at risk, they came in and low-balled with a low-ball figure and now they're losing money so they increase the copay to $5 so that they can keep their head above the water. I mean, this is the way it sounds to me.
Well, the testimony earlier, I think, just for accuracy sake and, I think, by way of numerous discussions and the 190 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 letters going back and forth, the chain of events is that the City asked Rite Aid or Eagle what would happen if you increased our copay from 2.50 to $5. So I think the first part of the chain or the events was that we, the City, asked for the potential of $5. They responded, If you increase it to $5, it will cut your per-month per-employee amount by x-amount. And there was this balancing act between those two financial amounts. They then agreed, based on the direction that the City wanted to go, to increase it to $5. I think your earlier point, though, is very well taken. Other than possibly our personnel director and a couple other people, there's virtually no one involved in this process. And what happens in reality is you get a package of information at open enrollment, and they just tell you that's it's being increased. There is no explanation as to why, there is no 23 opportunity for real input, there is no 24 discussion, there is no negotiation. It just is the way it. 191 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 And even upon asking for that justification and whether or not it was authorized or not at that time at least, there was no 5 providing of the letters that subsequently have been referred to as "a contract." At that time, the Law Department was under the impression that there was no 9 authorization for an increase in the copayment amount. Now we subsequently find out in last day or so that because of a letter from the City asking for it, a letter by Rite Aid agreeing to it, that that now constitutes a contract. And, therefore, they were authorized on January 1, 1998 to increase the copay to $5.
Mr. Chairman, that assumes that the dates on the letters are accurate. We have no way of knowing that at the present time.
Yeah, well, this hearing brought up a lot of unanswered questions here --
There are a lot of unanswered questions here that have to be ironed 192 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 out.
I was having homemade lunch in the back of the room and was kind of listening pretty much to your talking. Let me ask you a frank question. There's a lot of sympathy among people out in the community about independent pharmacists and the kind of service we used to get because we could go in and discuss, Hey, I got a bad cold, you know, and the doctor never helps me, what's your suggestion, Mr. Pharmacist, of what I ought to be taking? All of that is gone. There is no such thing of that happening and then we lose a lot, and my wife and I used to go --.
Realistically, 193 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 realistically, what is the chance of independents really sticking. We understood and I thought that the gentleman from Rite Aid's testimony was pretty accurate in this response, that there are a lot of pharmacists that are growing old, expect to retire, if they have children who are not pharmacists or are not interested in the business, and we're going to lose them anyway. . . And we did make an effort in 1993. I mated a very strong effort back in 1993 to work together with the pharmacists, but they are as tough entrepreneurs individual businessmen as any I've dealt with, and if I get two in one room -- to get two to agree on anything was almost impossible. I'm just asking, are we beating a dead horse when we talk about independent pharmacies or are we going to have to live with this other brand of these mega stores, whether it's Rite Aid, Walgreen's or CVS, and I don't know that any of them are basically different from any other ones, and I'm sure each one tries to carve out, you know, special feeling in the public. But in the Philadelphia region, would 194 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 there be any possibility of the independent pharmacies getting together and saying that we're prepared to -- if the City puts out an RFP, we're prepared to bid. We'll overcome our individual entrepreneurial to some degree to be able to work together. 'Cause if we're not, then we have to be make do, then it's our choice -- it will be Rite Aid or CVS or Walgreen.
Councilman Cohen, my suggestion was that you open up the bidding process to other PBMs.
Eagle is a -- Eagle is a PBM owned by Rite Aid. Okay, but I'm saying to open it up to all of them but to be weary (sic) of those that want a bid that are owned by a chain or owned by a drug manufacturer.
Is this a PBM, to use your language, that deals with individual pharmacists? 195 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
There are PBMs out there that could bid on your City contract and open up the network to all pharmacies -- chains and independents alike.
Is there a PBM out there that specializes in managing plans for groups of individual drugstores.
Well, does Eagle do that, does Eagle represent groups of individual pharmacists?
Not individual pharmacists. They try to -- you take SEPTA, okay. They manage SEPTA, Eagle does. And if you're an employee of SEPTA, you can only go to Rite Aid; you can't come to me. Okay, that's the kind of management they do. They try to manage closed networks.
So you're saying that the only thing -- apparently, your answer is no to me that, in fact, there's no way of 196 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 organizing the individual-owned pharmacists. The only thing you're seeking is a further inclusion of more independent pharmacies in any plan that may exist.
We need it opened up for anyone. I wouldn't be any better than the folks behind me if I were to say let's -- that we should open up a closed network only for independents, okay. I would be no better. I'm saying freedom of choice, okay, have a PBM bid. You know, have a few if you can get 'em and open it up to any pharmacy.
Well, would you be willing to deal on the -- excuse me, Mr. Chairman.
I'm just trying to find out some information. Take the existing contract, without regard to its merits, forget about all the complaints we talked about with Rite Aid. Let's just talk about, as Miss Seyda likes to talk and the Mayor and David L. Cohen before her, who really probably made all the decisions we're 197 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 complaining about. Now, would you be willing -- would the individual pharmacists in the area be willing to accept the terms of that agreement if they're opened to accept the copays that Rite Aid accepts so that to the City, there'd be no other costs beyond what it is in dealing with Rite Aid?
Well, not at these rates, not at the $1.25 fee. That's what driving us out of business, not competition. Competition -- we can compete. The only thing is we're being forced because of antitrust laws, we cannot get together, and the pharmacies that I represent, we cannot have a meeting and say we will not participate in that City contract, or we will not participate in this contract. We cannot do that. But not too long ago, when Blue Cross reduced the rates, three major chains pulled out -- Rite Aid, CVS, and Eckerd, okay? But they, as individual chains, can negotiate with Blue Cross. And after they negotiated, they cut better deals. Independents are still getting that low, low amount because we cannot do that. I don't know if you understand that. 198 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Well, I understand and I have some disagreements with you as an attorney on antitrust. I don't quite see the antitrust problems that you see.
I know, I know all about it because I was involved in this kind of situation.
Okay, well, I don't want to get into that because that's not relevant to the --
Well, I say that's not relevant to the answer I'm trying to get. Say the City puts out an RFP open to everybody, would you then -- would the individual pharmacies be prepared to accept the terms of any agreement the City could reach with the PBM? That's what happened here. There was 199 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 -- originally wasn't there an RFP for the original 1993 contract?
You said something about "We can't at $1.25," and I don't know what that means.
If I received a telephone call from CVS and they said, "Hey, Sam, what are the independents going to be doing about the Blue Cross scenario, are you going to participate or not?" That guy's in trouble for asking me the question, okay? We need a decent, sensible reimbursement -- not where you lose money on dispensing medication. And if you can give us that, we will be happy to participate.
Well, tell me, because you're not helping me. Does that mean that the current Rite Aid contract, that's the one thing that we know about that exists.
It is below a liveable fee. 200 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
What would the pharmacy need to have changed, these individual pharmacies?
I gave you a couple examples. Let me tell you what the fee for service is in the Medicaid program today in Harrisburg that pay for welfare prescriptions.
It's a fee there that everyone can live with. The fee is AWP minus 10 percent with a $4 bill, the cost of the drug, okay. That's AWP minus 10 percent and a $4 fee. This is what the Commonwealth of Pennsylvania Medicaid program pays for fee for service. That will give you a benchmark to start somewhere. A guy can live with that; you can't live with $1.25.
That's what it is now? 201 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Could you go through that whole formula and put in where the $1.25 fits in. You started with the cost of the prescription. Discuss that, start with the $1.25 less percent. 8
There are two portions to 9 the reimbursement cost -- drug and the fee, okay? 10
And the cost of the drug in the State is AWP minus 10 percent, making a 10 percent discount. The cost of the drug here is AWP minus percent, okay? The fee for the 15 State is $4, while the fee with Eagle or Rite Aid is $1.25. Do you get it, do you see the difference?
Mm-hmm. So you're saying that from a financial end alone, from the cost analysis, as Miss Seyda likes to refer to the deal the City has with Rite Aid, it is a good financial deal for the City. The price we pay for it, however, is that we drive out individual pharmacists who can't do business at that rate. 202 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Is that fair conclusion?
You know, we don't exist to make things more expensive to the City but we try to put a human being face on what the City is doing in its dealings. We also do have an interest in that.
If you want good care and a lot less complaints, you have to be willing to pay a little more to get it, and I don't think it's much more.
Get a PBM, you know, a company that will bid when you open up for bid. Then you will get --
Let me ask you, could you do this for us? We understood in this contract, it's roughly 8,000 --
Okay, 9,000 people are covered. Could you get somebody to estimate what the costs would be if we did what you wanted as compared to the costs of the current Rite Aid 203 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 contract.
Okay, 9,000 lives. And you want me to come up with some idea as to what it would cost the City to run a program where the fee would be better than what we're getting now and where it could be open to all.
Give us that information because we have to be concerned about both things. We are, even though are questions may not sound like it, we are very concerned about the costs the City has to pay, but we also want to see AN improvement in the service level.
But have to know how much that's going to cost. Maybe that's the reason why the service isn't what we're up to, maybe we've cut them so tight that --. 204 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Well, I didn't make the statements about the service. I mean that came from City Council.
Okay, so I have nothing to do with that, but I realize what I heard here, okay? And perhaps maybe that's one of the reasons why you're not getting the service. I would like to bring to your attention one other --
-- one other point, okay? And that is, I don't it think was ever answered where the City of Philadelphia retained as Capital Management Enterprises that you brought up before, Councilman Nutter.
Okay. And it's very unclear, you know, and I think -- I don't think you got the answer, either. 205 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 As its exclusive broker of record and consultant --
Let me tell that you this is not the first hearing and it won't be the last that I ask a question and don't get a completely straight answer to it.
Okay, well, let me see if I can set the record straight. And you may wonder where this money's going, some of money of your money, okay?
Okay. 206 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Well, they hired -- or retained this Capital Management Enterprises as its exclusive broker of record and consult for purposes of coordinating and assisting the City of Philadelphia in its review and evaluation of proposals submitted. Okay, that makes sense. I mean, you went out and you hired a firm because you got into this thing for the first time and you needed some advice. No problem with that. In addition, Capital Management Enterprises will have ongoing responsibilities, okay, ongoing responsibilities after award of the contract to assist in supervising contract compliance. Well, you're asking, How come you don't know anything? You're not being made aware of this. Where is this consultant that's being paid by someone here that's supposed to be doing this? To assist in evaluating policy performance and plan services and, if requested by the City, to construct annual reviews of the provider for the City of Philadelphia. Okay. Now, what's happened? Okay, so the 207 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 City paid him originally, the City paid him originally, right?
We don't know, we don't know whether they paid him or how much they paid him or --
Or whether there's been an amendment by an exchange of letters with him as well as with Rite Aid, we don't know any of that.
If the City selects the fixed price option, which you did, you selected the fixed price option, they were at risk, am I right?
Okay. The selected contractor will be required to pay -- the selected contractor, meaning Rite Aid, okay, will be required to pay CME, this outfit that was hired, a fee equal to percent of all the billings by the contractor to the City, okay? All the billings, okay, the total number of prescriptions, the amounts of the prescriptions, percent goes to 208 1 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 this contractor.
Well, this fee shall be paid monthly to CME within ten days of receipt of payment for billings by the City for the entire term of the contractor's contract, including any renewal thereof. If the City selects the fee-for-service option, which the independents are on, the selected contractor will be required to pay CME a fee of cents per prescription. That was done 14 originally. There was a 25-cent -- 15
Well, what's the 16 point that you're making? We understand that. 17
The point is why is -- when 18 you hired a consultant at the beginning, you don't 19 need him after you hire the PBM. That PBM is 20 supposed to take care of all of these problems and 21 all of these things that you're speaking of, to 22 give you reports and utilization and what drugs 23 are being used most, and if there's higher 24 generics in -- 25
Well, we really 209 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 wouldn't want a PBM that's a subsidiary of Rite Aid to be reporting to us on a Rite Aid contract; we'd want an independent group.
Well, they would answer them, but we wouldn't have confidence in them.
Well, then why -- okay. What I'm trying to say is that there's a payment being made to this organization, okay, 1 percent of all the billings and --
Mr. Gurson, it sounds like, if he's reading from the Rite Aid contract, that you are paying them.
You'll have an 210 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 opportunity to come back up.
Whether you ever get an answer, I don't know, but there's a lot of money involved here. If 1 percent of the total billings has to be paid by Rite Aid, you're not paying it, the City isn't. Rite Aid must be paying the broker -- I don't know what for, okay? Well, therefore, no wonder you need higher copayments, no wonder the pharmacies are getting low reimbursements, somebody else is making a lot of money.
Well, from your testimony, what I gather is that the City's terms with Rite Aid are not costing the City more money, that what they're getting is an amount that you say would not be enough for the pharmacist.
Yeah, it's not enough for 211 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 them either.
All right, thank you, Mr. Chairman. I've got a picture now. We're interested, we would be very much interested in a workable plan that would --
A workable plan that would maintain individual pharmacies to the greatest extent possible. But we can't ourselves, you know, fight the whole trend. If pharmacists are going to get older -- and I don't see any new discoveries yet that are going to make them younger -- they're going to have the right to retire when they want and they're --
There are a lot of pharmacies that closed because -- not because of their age; in fact, they're too young to retire. And they did a heck of a business filling 5, 600 prescriptions a day, more so than any Rite Aid that I know of, okay? It doesn't matter. But if the reimbursement rates to the pharmacy is too and they lose money, then they 212 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 can't stay in business.
We understand. That's the reason -- what we'd like to see come out of all of this is that Rite Aid, if Rite Aid remains the recipient of the main contract or any other -- I don't want to call them pension benefit managers because I get lost in that language, but whatever runs the main, we'd like to see provision made for inclusion of these independent pharmacies. And if it's going to cost more money, I can even understand that but we got to know how much more money so we can make an intelligent decision as to whether it's worth it to the City to maintain the existence of some independent pharmacies. Now, if it's too expensive, we have problems with that, you know, on the City treasury.
Well, I don't want to belabor this and get involved and so forth and so on, but in the Medicaid program, you have the same situation with Eagle Managed Care involved and owned by a chain, okay? And the -- how would you 213 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 like to, as a pharmacist, pay $5 for an item and they want to pay you 3; could you exist?
You cannot exist. Well, it's in black and white, documented all over the place, okay? And we're not getting anywhere because this is a way that they don't have to buy out any more independents; they'll squeeze you out. Thank you.
Thank you very much, Mr. Brog. Miss Frances Gallagher. And after Miss Gallagher, I would like to have Miss Seyda and the Rite Aid representatives back up at the witness table. (Frances Gallagher comes forward.)
Good afternoon, Miss Gallagher. I'm sorry for the delay and I appreciate your staying with us. Please identify yourself for the record and proceed. 214 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Frances Gallagher. I'm a clerk-typist with the City of Philadelphia Police Department. I was diagnosed with multiple sclerosis in April.
Could you please pull the microphone to you so that you're talking right into it.
Okay. I was diagnosed with multiple sclerosis in April of '96. After being diagnosed with MS, I started taking an injectable drug called Avanax (ph.) in August of '96, which was covered 100 percent after a letter was submitted by a physician, Dr. Fred Loveland. In his letter Dr. Loveland states why it is necessary for me to receive the injection. One reason was fewer and less severe exasperations (sic) than patients who are not on drug treatment. The second was fewer episodes of physical and psychological trauma. The third reason was the economic impact of multiple hospital admissions on an annual basis is significantly reduced. When learning of the new plan in 215 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 December 9th of '97, I contacted a Miss Laurie Davey, who advised me to write a memo to our Personnel Director, Miss Linda Seyda, advising her of my situation. On December 19th, I received a letter from Mr. Lee White, Benefits Administrator, stating insulin coverage is generally an included item probably because it is common and the cost is modest and known. Other injectables are not common, they can be very expensive, and the cost can be hard to project. I also received a copy of a letter sent from Mr. Lee White to Eagle Managed Care requesting Rite Aid to administer on a plan fee-service basis for coverage of injectables, which would cover 75 percent of an employee's injectables, up to $10,000, and thereafter, 100 percent. The new plan was put in place as of January 1st. My last injection was on February 5th of this year due to changes in our plan. The new plan lists insulin and syringes in a separate category from other injectables. It was only covered 75 percent on injectables and covers 100 percent on insulin and syringes. 216 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 The cost of Avanax is $892.98 a month. Under the new plan, I would be required to pay 4 percent of the cost, which would total $223.25 a 5 month. I will not be covered at 100 percent until 6 the first 10,000 in claims per year. My cost for 7 the year is $10,715. 8 If injectable insulin is covered for 9 diabetics at 100 percent, why can't an injectable 10 like Avanax be covered for treatment of multiple 11 sclerosis? 12 Based on information that I have found 13 out through research in the Americans with 14 Disabilities Act, your employment rights as an 15 individual with a disability, that an employer 16 provide employees with disabilities equal access 17 to whatever health insurance coverage is offered 18 to another employee. Why is a diabetic injection 19 covered at 100 percent and no one else? The ADA 20 makes it unlawful to discriminate in and in all 21 employment practices such as benefits. 22 As a clerk-typist II, my net income is 23 $1,205 a month. I am a single parent with a 24 daughter in college, and I cannot afford to pay 25 $223.25 for this injection plus a $5 copay. 217 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 This treatment was preventing further deterioration on my physical capabilities. I stopped taking the Avanax on February 5th because I could not afford to pay for it. Since then, my condition has deteriorated. I have experienced bowel and bladder problems, it has become extremely difficult to control my balance while standing and walking, and there are times when I cannot drive my car because I have difficulty with my foot. When I was taking Avanax, the only problem I experienced was a problem with my balance, for which I used a cane. I am only asking that I be granted the same prescription coverage for treatment of multiple sclerosis as those who receive injectable insulin for diabetics. Insulin for diabetics is covered at 100 percent. It seems only fair that an injectable drug for the treatment of MS or any other illness that requires an injectable treatment be covered at 100 percent. Thank you.
Thank you very much for your testimony. Let me just ask you a couple quick questions. 218 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
You indicated that your treatments, the total full cost of it is $892 a month.
Times gets you 8 to -- I think you indicated about $715. 9
I'm sorry $10,715. 11 The new plan allows for 75 percent of up to 12 10,000, and 100 percent thereafter.
So in your situation, you pay the $223 a month which, for you, amounts to $2,676.
And somewhere at the tail-end of the year, you cross the $10,000 threshold.
I would assume, I'm not sure because -- 219 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
No. There would be 100-and-some dollars still that would be debatable because the prescription is 892, so the 715 -- I don't know what would happen come December, if they would cover the last injection 100 percent or not.
Right. Now, again, by way of your testimony, apparently, by way of the plan at the time --
-- the City believed and demonstrated that your condition warranted 100 percent coverage.
Because in August of 1996, by way of a letter from your doctor, he or she indicated that you needed this medicine for the laid-out purposes, and the City at that time, based on the plan that we had, agreed to cover it 100 percent.
So the only change 220 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 here has not necessarily been one of your condition, although, hopefully, at least from August of '96 until February or so of '98, you either maintained yourself or possibly improved, but because of a change in our plan, not in your condition, someone decided somewhere that now you were not eligible for 100 percent coverage.
Well, I'm stunned. The City is quarreling with Miss Gallagher over what, from the City's point of view, as best I can figure out, involves something like 2500 to $2750 in the course of the year. Now, that amount of money to Miss Gallagher is a huge portion of her total salary. To the City, it is not even -- I can't even say it's not even a drop of a -- it's not even a particle of a drop, and I just can't understand -- we -- I guess we have -- I'm wrong, Miss Seyda, I apologize. I assume there are about 5,000 people in her condition, so we have to multiply the 2500 or so that it would cost the City to give her the 221 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 same coverage before. How many people are involved?
Miss Seyda, at this point, because we were going to lead into you and Rite Aid, you might as well come forward.
Yeah, come forward 'cause I would like to find out what -- you know, maybe this is where City government money is wasted.
While Miss Seyda's coming to the table, I think it's important to note that if Miss Gallagher I think, indicated that she, by way of salary, receives $1200 a month take-home pay --
At $223 a month for her prescription, a fifth of her salary, 19 percent of her salary is going just towards -- 20
That would be plus the $5 copay and my other medication that I take.
Yeah. How many employees would be involved in this particular 222 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 medicine? How many others have asked for coverage at the 100 percent level for injectable -- I don't know what the specific thing is here.
As I recall, and I'm going from memory, when we looked at this, that for this particular drug, the cost to the City, based upon usage last year, was something in the neighborhood of to $30,000. Something in that neighborhood 10 is what I recall. 11
But we'd like you to 12 check it but that sounds like 10 to 15 employees. 13
I don't recall the number 14 of employees. But, as I recall, the cost of those 15 -- of that particular drug was somewhere in the 16 neighborhood of, I think, 25 to $30,000. I just 17 don't remember how many -- 18
Well, how do you 19 justify putting an employee in jeopardy of her 20 health, spending all your time -- I assume you are 21 at the generally commissioner's level of pay -- 22 your time, this Miss Laurie Davis's time, this 23 fellow who wrote the letter, I don't know whether 24 it's a man or woman, Lee White. 25
He's a gentleman. 223 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
A gentlemen, all right. I didn't know by the name. And making us spend all this time. I think we've far expended more than all the employees would require. Why does the City paint itself into such a horrible corner? What are you trying to teach her, that government can be real tough and ignore the needs of its employees? I don't know what you're doing here.
Actually, the plan that the City has in place, the original intent of that plan was to eliminate injectables entirely. What we have been trying to do is to come up with a policy that will be equitable for our employees. And I think that I have indicated to you and to Councilman Nutter that we are committed to addressing this problem and will do so.
Well, I think it ought to be addressed right away. I think it's a terrible thing that's she's been compelled to stop using this back in February. 224 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 There is a human cost as well as a financial cost. You keep talking about financial costs. I think you fail on that, and you certainly totally fail on the human cost. I don't understand that. I think she ought to be repaid every penny if she's paid anything out of her own pocket under this now policy, that ought to be repaid. She ought to be authorized before this day is over to get that injection and to continue to get it for as long as she needs it. I don't understand the City playing with that. They give bonuses -- top-level employees in the City government got high bonuses that totalled far more than what we're talking about here for just a couple of employees. You know, I don't know what guides -- do you do anything other than a cost analysis. Is there some such thing as a human analysis, or do you ignore that totally?
I think the fact that we have been attempting to come up with a humane way to deal with this --
Well, there are 225 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 humane ways to pay the bill and say, Sure, we'll do it, we'll work out how it's going to be done. Why take six months to say no and then finally say, Well, maybe we'll try to work out something. Why weren't you concerned when she told you right away that she can't afford to take it anymore? Why didn't you call her call to find out what the circumstance was and authorize it month to month until you determined your policy? Why did you make an employee suffer? And not only her, but the family, the daughter's that in college who needs her support not only financially but as a family member. You know, I don't know what's happened to this city. You know, government used to be considered as the model for determining how people ought to treat other people and working relations. And the lesson this case teaches us is that the City of Philadelphia wants to be regarded as the lowest-level employer there is, unconcerned about health needs of its employees. And I'm stunned that you've participated in doing that. Could we get an answer, Mr. Chairman, by the end of the day? 'Cause if not, I think 226 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 we've got to do something quickly.
Thank you, Mr. Chairman. I was just going to offer that. Miss Seyda, it's about 3:15. I know you've had maybe not an opportunity to leave the room, but I did see you using the phone. I think we have an agreement between ourselves and you that we would have an answer to this issue by the end of the day. I think what I'd like to do is to again encourage you to try to get this nailed down and be able to report to us. We have some additional questions to ask the Rite Aid representatives. I think I would also point out to you that given the nature of this testimony, and we do have a representative from the City Solicitor's Office, although I would not put her in this particular situation, this is a freebie for you. But we could get into a longer discussion, and I think it would be pretty serious on the City's part about the prospect of an ADA claim or suit. And I would venture to guess, and Councilman Cohen is the attorney on the panel but I always try to take the full opportunity to 227 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 practice law from here. I would venture that that claim, even just its defense, could very well take us beyond $25,000. And so I think someone needs to do so that analysis as well. And that has a fiscal impact also. So why don't we try to, for the moment, excuse you from the table. We really do want to get this resolved today. I'd like to get the Rite Aid representatives back up to the table, but I am hopeful, very shortly, that you might be able to give us a much more positive response in this particular matter.
Okay, you're welcome. Thank you. 228 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Mr. Gurson and Mr. Hushen, when Mr. Brog was at the table earlier, do you have any information to indicate what the -- again, if we're even close on the disbursement rate at an average of 2 per employees, 9,000 employees, 12 months a year, $5 copay, that amounts to $1,080,000 in copay amounts generated. And that would also give us, it appears, 216,000 prescriptions filled. Do you have any estimate on the number of prescriptions filled out of that universe by independent pharmacies versus the Rite Aid corporation?
Yes, Mr. Chairman. I can give you and we can extrapolate from it, but within the scrips for the entire plan, it was, we believe, 225,000 claims in round number, and 193,000 of those approximately were filled by Rite Aid or at Rite Aid stores.
The participants of the plan are choosing where to go, and approximately 85 percent are coming to our stores. 229 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. And the participants in the plan are choosing to have 85 percent of their prescriptions filled at Rite Aid, notwithstanding the fact that I believe Miss Seyda's testimony was, in conjunction with yours, you have 96 stores, and there are how many independents participating?
If I recall the City representatives testimony, I think it was something in excess of 200 slightly.
So there's a 3-to-1 ratio between eligible independent pharmacies participating versus Rite Aid stores. Yet, Rite Aid is filling 85 percent of the prescriptions.
You know, I'm sure you're very pleased by that. Do you have any explanation for that beyond the great and wonderful, bright, accessible, full-service, milk-juice-eggs-candy stores that you operate? I mean, is there any explanation for why the entity with the smaller number of stores takes 85 percent of the business? 230 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
We don't force anybody into our stores. I assume they find it more convenient and a better shopping experience. It costs them the same thing in our store that it costs them in somebody else's store to get their prescription filled, so I assume the consumer is making the choice.
Well, that may also have come as a result of the consumer having virtually no choice when it started, as you well know. You may not have been here at the time, but I think you heard the earlier testimony. When Rite Aid started, it was 80-some or 90-some stores plus 10 independents. So you grabbed the business at that point in time. Since then, obviously, the network has opened, although, to be honest with you -- and we certainly can't expect you to do this, but I don't think we've done a particularly good job of letting people know that they have more choice. I mean I just -- I find that interesting.
Well, as I say, we can't force people into our stores. If they're -- we 231 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 hope they're not dissatisfied with our service. We know, as there has been evidence today, that there are times that they are. But the numbers seem to indicate that the overwhelming majority are satisfied and find the experience and the service to their liking.
Well, don't break your arm, now. I mean, your earlier -- it wasn't your testimony, it was Mr. Hushen's testimony that also indicated that you closed 60 stores in the City and transferred those prescriptions over. So, I mean let's again be honest with each other, you have shrunk the universe of potential participants. And if -- I mean, look, if I lived in East Falls and I used to go to Tilden Pharmacy and you bought Tilden, and now I have to go to Rite Aid, I don't have any choice unless I decide to go to an independent up in Roxborough somewhere 'cause that was the only pharmacy in East Falls. So that is also a way to capture the business. You cut down on what's available to people. Is that fair?
It happens. 232 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Okay. I mean, it's a part of the practice, the game plan, it's a part of the program.
Well, in the words of one much smarter than myself, you make them an offer that they can't refuse.
Do we have any location of these 200 places? Because up in my portion of West Oak Lane, in my portion of West Oak Lane, there were two independent pharmacies, one is Esquire, at Broad and Chew; the other was Bookbinder's on the 1400 block of west Stenton. Esquire's is still there, it's been there for many, many years. Bookbinder's, we suddenly saw in the Rite Aid in the Champlost Mall a sign saying that all of the Bookbinder prescriptions now are here in this Rite Aid store, and the Bookbinder place was closed. Now, I know of no other pharmacy in that area at all other than Esquire. I'm talking 233 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 about private independents. There's CVS, there's Walgreen's, there's a new Rite Aid at Broad and Hunting Park, you know, that exists. There's a CVS up on 66th Avenue, there's a Walgreen and an Eckerd down on Broad Street, but I don't know of any independent pharmacies. Could we have a list of those?
Miss Seyda had indicated earlier that there was an updated list as of April '98, and that the Personnel Department was going to take some extraordinary steps to get that information out.
I have an old list. And that's why I say, on our behalf, I think that we as a city government have not done a particularly good job of getting that information out to employees.
And maybe he deserves the ability to pat himself on the back without breaking his arm. If get information out and the statistics are still the same -- incidently, Mr. Chairman, my thought is, is there 234 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 any way of checking the 85 percent figure? From where we look, it looks to me much more like 90 or 95 percent.
Yeah, well, I don't think on the math. I think he's exact on the math. But from whom do we get the information as to the number of prescriptions filled by independents?
Yeah. I only asked the gentlemen what the total universe of prescriptions filled is. I mean, they would naturally have that information through their wholly-owned subsidiary, Eagle Managed Care.
How would they know about the number filled by independent pharmacies?
Oh, we know that because when you go into a non-Rite Aid pharmacy and have your prescription filled, they submit -- that independent pharmacy submits the bill, if you will, for payment to Rite Aid, and Rite Aid pays that independent pharmacist. That's how we know 235 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 so we know how much paid.
Right. And then they're also on a computer-linked network.
Well, yes, it's done -- it's done over a -- it's adjudicated is what the word is called immediately over a network. So there's two levels of this. There's what the City pays us, and then we put together the network of pharmacies which are Rite Aid and these independents, and we pay the independents, in effect, for the City.
This kind of goes back to that service area again. It's just kind of a minor sticking point. But as we talk about computer links, and I think when Ed was in my office, you were even talking about satellite transmission and all kinds of stuff. The fax machine issue, are you going to get a fax machine in all of the stores?
That's generally a corporate decision. I can find out for you, but 236 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 at this point in time, to my knowledge, there's no 3 plan to --
Well, let me ask you this question, then. Just from an operations standpoint and a customer-service standpoint, you think that would be a good thing to have?
Well, if I may respond, it would probably be very helpful in some instances, maybe the instances of new prescriptions. But for refills, anybody in the City can pick up a touchtone phone and have their prescription refilled through the phone. I use it. Anybody --
I understand that. If you want to proceed down that path, how many new -- in your 225 for last year, how many were new and how many were refills? I mean, you must get new prescriptions every day, right?
Absolutely. 237 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Well, the doctors call prescriptions in. I mean, the fax machine would -- typically what the doctor does is he calls the prescription in, and then the customer comes in with the prescription to the store and picks up the prescription. I mean, there is no necessity to --
I understand how things operate. Think about it. Do you have any protocols on how quickly a prescription has to be filled? Do you have any customer service standards on that? If I call you at 10 o'clock in the morning with my refill, when should I expect it to be done? If my doctor calls you with a new prescription at 11 o'clock in the morning, when should I be able to pick that up? I mean I've had situations where a prescription was called in. They did not attempt 238 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to fill it until I physically walked into the store and then reached into a pile of prescriptions and looked for it. That would seem to totally negate the purpose of calling it in in the first place.
I believe our standard is to have the prescription filled within minutes. 9
Isn't filling 13 prescriptions really largely today taking from a 14 larger container and putting it in a smaller 15 container? I mean, I don't see anymore, you know, 16 the stirring and the ball, you know, and actually 17 preparing something. I think everything comes 18 prepackaged now. 19
Right, so I don't 239 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 know -- you know, I've had that experience of waiting. They ask me to wait and I wait. You know, I figure, well, they've got something to do. And then, finally, they call me, and as they call me, they start emptying from a larger jar into a smaller. Sometimes the jars are packaged. I take -- I'm trying to think of what it is. I call it "Fantastic," but it's not. It's Pentassa (ph.) for Crohn's condition. And they come 240 'cause you have to take many of them in the course of a day. Each jar comes -- it's 13 already with 240, and my prescription monthly is 14 two of these little packages. 15 Now, why wait the 20 minutes? Then 16 when my turn gets called, all they do is remove 17 the two, you know, and present it in front of me. 18 Now, you know, I don't know why a system can't be 19 developed so that when the stuff is there over the 20 counter, okay, you need this, fine. In a moment, they're back with the thing. So what takes the 20 minutes?
Councilman, I think that may be a function of volume of prescriptions versus the impact on, in many instances, one 240 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 pharmacist. One pharmacist can only fill so many prescriptions, answer so many phones, and respond to so many people at a particular counter. And I think that that's a -- I mean, in our terminology, it's a deployment issue. I mean, you go into a bank, you know at noon, and 8 sometimes there are two tellers. Now, I've never 9 been able to understand why they do that since 10 that's the greatest rush hour at the time in the 11 bank versus at 3 o'clock in the afternoon when 12 there are six tellers.
Yeah. Well, I investigated it. They said, Well, our people, like everybody else, like to have a lunch at 12 o'clock.
And there's hardly any answer you can give to that. And we have three to four pharmacists in back in the Champlost store that I'm talking about, but they need five or six at least, you know, with their volume of work. But, basically, they're still only 241 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 pouring from one jar -- one container to another container. Now, I know they've got to examine it carefully to make sure, you know, that you're not getting something that doesn't mix with something else you've ordered.
There was a question about, and we've gone back and forth on this. We started with the capitated plan, we went to fee for service when the network opened. Are we presently on a capitated plan, or are we on a fee-for-service plan, or are we on a hybrid plan that's capitated for you and fee for service for independents? What kind of plan do we have?
You are on a capitated plan with us, and we reimburse the pharmacists -- the independents on a fee-for-service basis.
Well, no, you have a capitated plan because the amount the City pays per member per month is fixed.
Right. 242 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
All right. So let us just -- let me see if I can give you an example. Let's assume that the rate that the City --
But you're doing something else as it relates to the independents. Is that -- as I recall in the '93 and '95 discussions, everything was about "it's not liability, it's risk." It was the spreading of risk.
And I believe that you did not want a capitated plan with a large network of independent pharmacists. You were willing to accept it with, I believe, the 10 or 12 243 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 designated because of geographical coverage, but the moment anyone started talking about totally opening up the network, the risk issue came in, and the only way you wanted to deal with that was by going to the fee for service. Is that accurate?
Well, because in a cap -- if the City only paid -- as I explained before, Chairman, the City only pays us; it does not pay 244 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the independent pharmacies.
We take the risk on a capitated plan. Let us assume that the capitated rate is -- the number today is 65.
$65, okay. And let's just, for hypothetical, say it cost us, say, $64 a month to service that. We take risk for one prescription, just for argument sake. We take the risk that you come and have four prescriptions. It doesn't cost the City any more if you have many more prescriptions than we anticipated you would have. All right, we were willing to do that at the time the plan was first put into place because we got an exclusive network. In this business, if you get exclusive networks, the charge to the plan is less than if you have a preferred network; and less again than if you have an open network. When the independents came in, we were no longer having an exclusive network, so we went to a fee-for-service basis. 245 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
But what is your concern and what do you believe this additional risk to be? Do you think that because the independents are in that somehow employees are going to go hog-wild crazy and start getting more prescriptions --
No, but the economics for us are different if more people come to our store than if they go to someplace else.
Could you be specific with that? Because now I understand the testimony of the fellow representing the independent groups; I didn't understand what he was really aiming at but now I see 'cause this gives you -- you are the one that sets the amount of the fee that they get?
Well, we set the amount of the fee in the sense that based upon what we charge the City, in calculating what we're going to charge the City, we calculate and take into account how much we will have to pay the 246 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 independent pharmacists.
And does the City have anything to say about that figure that you're setting?
And no matter what the capitated rate goes to, you still have determined that the dispensing fee will stay at $1.25? I mean, you had an 8 percent increase last year, you've asked for 10 percent increase this year, now we've got this balancing act going on between the per-month per-employee amount, what you wanted based on 10 percent, now it's been dropped because the copay has been increased. So no matter what your increases are that come by way of you exercising your right under the contract provisions, you're keeping the dispensing fee of $1.25; is that right?
The dispensing fee -- I mean, we're talking about a lot of -- you know, you've talked -- heard and talked about a lot of different things.
But tell us 'cause 247 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 we don't know. We're expecting you to tell us what are the different elements.
Well, let me take you to the example that was given to you before where the -- it was suggested that the State pays AWP minus plus a dispensing fee of $4. So if you had, on 8 a particular medication, just to make the numbers 9 work, a $100 AWP, that's a cost. The City would 10 be paying, if the City -- if that was the City's plan, would pay 100 minus 10, or 10 percent, plus $4, or $94 for that prescription. If the City plan on a fee-for-service basis is AWP minus 15, plus $1.25, then the City would be paying $100 less 15, or $85, plus $1.25 -- $86.25. So what you said before was correct. The better deal for the independents is a worse deal for the City. Somebody has to pay for prescription medication being delivered not only to City employees and City retirees but to the public generally. And that's -- that's -- it's all in the mix of the economics.
Now, tell us about 248 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 the $5 copay. Where does that go?
The per-member per-month of $65 is a fixed fee, and the $5 is a fee that the customer, the City employee, pays every time he has a prescription filled, $5 in that situation.
That's in the cost. When he has that filled -- when he has that prescription filled at an independent pharmacy, taking -- let's just take the example of $100 for the prescription minus 10, with a $5 copay.
Minus 15 and a $5 copay, then the price for the drug to the independent pharmacist, what he's going to get pay for the cost of the drug is $85, of which $5 is represented by the copay, $80 is represented by what Rite Aid pays to them out of the capitated pot of money that it has gotten, plus $1.25 for each prescription that he fills.
So in the independent pharmacy example, the $5 is already 249 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 calculated in the reimbursement.
In the cost of the drug. What happens when I pay the $5 at the Rite Aid store? Where does the $5 go?
To Rite Aid. But Rite Aid -- you're -- the City is paying Rite Aid exactly the $65 and the $5 copay. There's 100 percent of money that goes to Rite Aid $70.
I don't know the answer to that question. I'm sure we pay a lot of different prices.
Can you get us some 250 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 information on that?
On what the independent pharmacist gets, I was not able to follow you. Right now, when -- over the counter, the customer will pay that $5 copay.
Right, how much 251 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 would he get?
In $100 with AWP minus 15, he'd get 80 from us, plus another $1.25.
Well, he'd get 80 because you're figuring he's getting the other 5 from the copay. GURSON: Right, the $5.
By raising the copay, it doesn't affect what he gets. He's only interested in -- he's interested in what the discount from the AWP is because he has to buy the drug, so he's interested in what he discount from the AWP is and what the dispensing rate is.
So he winds up paying -- getting the cost minus 15 percent.
Correct. Not necessarily his cost, but a published cost that's called "average wholesale price," that's what "AWP" is, and the industry standard.
Let me ask you this question in the same example: If there were no 25 copay and the independent pharmacist would just 252 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 get AWP minus 15 from Rite Aid plus $1.25.
So he or she would get $85 plus the $1.25, but it would come directly from you.
In this scenario, you actually only pay 80 plus $1.25 because they got 5 from the public employee when they walked in and got their prescription.
Right. And the City paid us less than the $69 fee because, remember, at 2.50 --
To 65. The copay has a number of purposes, and one of them is cost-shifting from the plan to the participant.
But doesn't the fact that you've set that $1.25 for -- what do you call that fee?
Dispensing fee. 253 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 That you have control over that, doesn't that mean that, very largely, the economic fate of the independent pharmacist is in your hands?
What he said was he's being -- independent pharmacies are being squeezed.
Well, what's -- what's -- what's -- what's -- I can't analyze for all the --
What was the federal or State level that you were citing before? Is there a dispensing fee?
I don't know the rate at the moment. I think it's under challenge, as a matter of fact.
Well, was it -- I never thought it was intended that Rite Aid, or whoever the contracting company with the City would be, would have the power by itself to set the dispensing fee because it just gives them 254 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 enormous weapon; whether they use it or not may be a different matter, but it gives them an enormous element of control.
We -- independents are, if you will, invited into the -- the network is open and independents are told that they can participate and this is the rate at which you will be reimbursed.
Hmm. Just to make sure I ask all the questions that I wanted to ask, and I think I asked you this before, but I want to make sure. You were going to get me some information, your sales information and percentage breakout between your pharmacy revenues and what 255 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 we'll call everything else for your stores here in Philadelphia. I think I may have asked you that.
It is approximately 50/50 at the moment, the difference between the pharmacy revenues and what we call an front end.
But you didn't know what the -- I think you didn't have the actual figure.
Right, you didn't know what your revenues or sales were for 1997 for your stores, I think, in the first place.
In the retail industry, Lord & Taylor, the department stores have a figure based upon what revenue is produced per square foot. And each segment of clothes, the petites, the other sizes and other things, you 256 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 know have a dollar-figure attached to them and that's how they their make decisions as to whether they're going to maintain a spot for these kinds of clothes. From what you've said now, this tiny area, the pharmacy -- I'm talking of Champlost -- must be an enormous producer of value for that little space because if it is one -- well, maybe it's 1/20th of the space in the Champlost store. I'm just estimating, it could maybe 1/30th, maybe it's 1/15th, I'm not sure, but it's a tiny area physically of the whole operation there. It must be a tremendous revenue producer by the standards used by the rest of the retail industry. Does the pharmaceuticals use that method of calculation? I understood it was generally in all the retail fields.
One reason is because Lord & Taylor doesn't have professional pharmacist that they have to pay. We have to pay a professional pharmacist in that small part of the space.
You mean the 257 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 expenses of operating that --
Speaking of the pharmacist, given the fact that we have one of the premiere pharmacy and science schools in the City, if you could get me information on the 96 stores and some detailed data about the demographic makeup of your pharmacists by way of gender and race as well as store managers, the same information. But I'd also be intrigued to know how many of the pharmacists actually come out of the Philadelphia College of Pharmacy and Science. We have another one of these customer-service matters that you've come to know and enjoy during the course of this hearing. One of one of our staff members got a letter from Eagle Management recently saying that their request for prescription drug reimbursement had been rejected for the following rejection code reasons, numbers 9 and 10. 9 - the reference prescription number was previously paid by Eagle Managed Care; and 258 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 - the amount submitted reflects your copayment, which is not reimbursable through Eagle Managed Care. Now, I was kind of intrigued by this, given the fact that the prescription amount was $57.16. It could or could not be considered some kind of maintenance prescription. And we are left perplexed as to why, if a person's in our prescription drug program, why wouldn't you pay for the prescribed drug. I mean it's got a -- it's from a doctor, it's got a DEA number, it's got everything that seems to make it walk, talk, and sound like a prescription. Why wouldn't you pay for it?
If you would share with me, again, the reason. I thought that the code that you read -- and I don't know it by a number -- said that we had already paid for the prescription, that the prescription had already been paid for.
Well, from what I can tell from this paperwork, you may have paid for one a few months ago.
I'd be happy to look into 259 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 it.
Okay, all right. We'll make sure. Just for the record, as we talked about the technological advances of the Rite Aid Corporation, the receipt for this one also mentions that you can fill your prescription over the Internet.
Okay, very good, you are clearly marching into the 21st century. Miss Seyda, you seem like you might have some information that you might want to share with us?
I think you're just about done, but you've invested so much time and effort into today, I'm sure you'd like to stay till the conclusion. 260 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
Thank you. And we have that customer-service matter that we need to get cleared up. I have all the paperwork up here.
I would like to advise Council that we have resolved the issue with Miss Gallagher, and that her prescription -- her injectable treatment plan will be covered. We are still on an ongoing -- need a process in place on an ongoing basis, but her specific treatment plan has been approved.
And that means what? She's eligible, say, tomorrow to go and get the injectable treatment?
And has she paid out any money under this four- or five-month period, will that be reimbursable to her? If she's paid; I don't know whether she's paid. 261 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
If she has, we will certainly handle it for her. I just don't know what the facts are.
I seem to recall, Mr. Chairman, she may have indicated that she had not had a treatment since, I believe, February of 1998 for financial reasons. Obviously, I don't know how you --
Right. I don't know how you make up for that, I don't know, you know, but we would hope that you would --
The City just has to hope that nobody sues, and the case doesn't go before Judge Shapiro in federal court.
Right. 262 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
As I understand, we've not done too well on these disability cases in the federal courts.
Miss Seyda, one, let me say thank you for working on that and getting a resolution to it. But to also remind you that there are, apparently, other employees who have this same situation, and you were relating to us the need for a larger policy decision or a possible change that you are in the process of working on.
If I could clarify that. The policy decision has been made. What we are in the process of working out is what the medical review process will be for these cases.
Do you expect within a day or so to notify other similarly-affected employees that there has been a policy change and notify them as to what mechanism or process they need to access in order to avail themselves of the same opportunity as Miss Gallagher?
We are in -- as I indicated, we are in the process of working out 263 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 what that medical review process will be and who will do it. I expect to have that revolved very shortly, at which time we will notify any other employee that we are aware of.
Well, let me ask you this question? Do you know what that medical process was back in August of 1996 that allowed Miss Gallagher, at the time that our plan allowed this, to have a letter submitted from her doctor explaining why she needed to have this particular injectable drug that was apparently accepted at that time as the basis for approval? Do we need anything beyond that?
I don't know the answer to that because I don't know -- I don't personally know how that was being handled in the past.
Will you get to us information that kind of wraps up this whole situation and what has been done and what will be done going forward and what this medical review 264 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 plan or system will be?
Thank you. Councilman, any other? (Chairmen Nutter and Cohen confer off the record.)
Miss Seyda, we thank you and we thank the Rite Aid representatives. We know it's been difficult for you, but it's also difficult for us at this end. And we hear these complaints probably more. You hear them at one session here; we hear them on a continuing basis every time we're out in the field, which is very frequently.
Well, that does remind me of one other thing. You heard the testimony, I believe, by Mr. Brog, which talked about the HMOs having some --
Exactly. Which seemed to be more of an on-the-ground, in-the-locale kind of a --
It's an apples-and-oranges situation. It's not relevant. The HMOs have 265 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 grievance procedures to determine whether a particular treatment is warranted in a given case. The City has a plan that says, These drugs are covered.
Well, I understand that. We're not talking about drugs covered, drugs not covered. What we're talking about is resolution of problems, a central complaint system, and we how go about reviewing what happens in the protocols that go with it. Your response has been, We should call 1-800-Rite Aid. That's as it relates to you. I've also asked Miss Seyda, though, to develop a service-standard procedure and program for us. But I asked, I believe, you and Mr. Hushen to think about what else can be done for people right here and who they talk to. I mean, I have no sense of any kind of, I guess, confidence that beyond calling the 1-800 number that there is any further follow-up. I don't know that system, I don't understand how that system works and operates; whether you just call the 1-800 number, you have a conversation with someone, it kind of gets worked out, and then 266 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 it goes away. As opposed to a recall and report system. I mean, we heard some testimony that technically, apparently by way of the RFP, our consultant is supposed to do annual reviews of what goes on. Well, I've never seen anything about that, heard anything about that, never seen a report or anything else on that particular issue. So there is, in my view, and based on my experience, there's no on-the-ground regular monitoring or evaluation of what goes on. We pay a pay per-member per-month employee amount, you pay a dispensing fee, people pay a copay, and that's kind of it. We get what we get. And every open-enrollment period, we get information about what's going on. So I mean there's not a lot of real relationship in ongoing monitoring and evaluating from my standpoint. I don't see it, I don't know how it functions and operates.
Well, we provide the City with reports on a periodic basis with respect to information that they ask for. There are 267 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 standardized reports. I'm sure the City can tell you better than I can because I just don't know of my own knowledge what those reports consist of and what their frequency is. What the Administration does with those reports, I can't tell you.
Well, I understand that. Then what I'm going ask Miss Seyda is --
I want copies of all the past reports as well as, for the moment, some level of agreement that prior to any contract reauthorization, if you decide to proceed down the path, which I totally disagree with, which is this kind of every-year game that we play; or if we're going to into a multi-year contract phase, we would have those reports prior to any reauthorization, signing of contract, letters flying back and forth, people agreeing by way of individual letters that get signed, we really should see those reports before any of that kind of activity takes place.
If you could clarify, you know, for me specifically the reports, the types 268 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of reports that you're looking for.
Mr. Gurson just said that Rite Aid Corporation provides various reports to the City on a regular or annual basis about, I guess, number of prescriptions filled, utilization rates, a whole --
I can't even ask what I want to ask about them because I don't even know what's in them. Whatever those reports are, I'd like copies of them going back to the beginning of the contract. But, further, prior to any reauthorization, whether it's the one-year contract scheme or if we go to a multi-year contract, we certainly need to have that information before any new contracts are signed.
(Inaudible, off 269 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 mike.)
Well, I was going to say, City Council practice is that the Councilmember that introduced the resolution has a continuing responsibility and to be able to report back to the rest of the Council. Therefore, in this case, I think copies of all reports ought to go to Councilman Nutter. He was the sponsor of the resolution that brought about these hearings. And to make it simple, we think there ought to be a copy of anything that transpires. If there are going to be any more letter agreements or anything corresponding, we ought to get a copy of anything. And if you run into a problem with any of the supervisors you have, Miss Seyda, the Managing Director, the Chief of Staff, or the Mayor, we'd like to know so that we can resolve it. But it's our request that we be kept continually informed. And then in addition, I think what Councilman Nutter said is we want assurance that before there's any effort to exercise the option 270 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 of renewal that we be informed in plenty of time so that we can consider it and express our opinion. So that if we agree, fine, we say we agree, go ahead. And, you know, if we disagree, we'll have a chance to discuss that before the final decision is made by the Administration.
Exactly. Lastly, Mr. Gurson, questions have been asked about the payments to the consultant. Your initial response to that was you weren't sure who was paying whom. You seemed over the rail when Mr. Brog was reading from the RFP.
Yes, we are. As part of the contract, we are paying the consultant's fee as required by the RFP.
Okay. And there seem to be two components to that. Could you go over that? Did you hear what was read into the record about that? There seemed to be a percentage based on the disbursements by the City. And then I was slightly distracted, but I thought I heard something about a per-prescription issue. Can you explain that? 271 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
I thought what I heard was that there were two alternatives. And on a capitated basis, the payment to the broker/ consultant would be 1 percent of the amount paid by the City. And on a fee-for-service basis, it would be paid on a per-prescription basis, a -- I think it was cents that was mentioned. 9
It would be paid on a 11 per-prescription basis. Not both being paid. It 12 depends which way -- which plan the City is using. 13
-- per month per 23 employee and the total dollar-amount paid out by 24 the City to Rite Aid increases, does that mean 25 that there is an automatic increase as it relates 272 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 to the consultant as well? It's just 1 percent of whatever.
It's just 1 percent of whatever. I think that's what RFP said, as I heard it read.
No, it is not because to the extent that -- as I said before, copayments have a variety of functions. One is to make it more attractive for the customer to take generic medication so that the cost is less. And the other is to shift costs, just purely shift cost from the payor (the plan) to the participant. And that's what a copay does. But the 1 percent is not part of the City's payment. I mean, the copay is not included within the City's payment for calculating the amount.
Referring to Councilman Nutter's earlier series of questions about having a local person that everybody could call, Rite Aid did have such a person in part. His name is Manny Stamatakis. He was the original 273 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 representative of Rite Aid. We understand he actually testified sitting where you two are, he and David L. Cohen testified together in support of the original contract. Now, he still may be a representative, but politically, he's moved into a different area. He's Chairman of the Delaware River Port Authority. But he was the person, when nothing else availed and I made complaints to David L. Cohen about the poor service, he said to me, "Well please call Manny Stamatakis." And like that, the problem was resolved. We have a problem here. A member of our staff came under the plan in October of last year and hasn't even been able to get from Eagle Management a -- what do you call it, a membership card? or whatever the card is that send out so he can show his pharmacist that he truly is covered. What could explain that?
Well, it could be that the City has not freshened -- and I don't know that it's the case -- the eligibility data. We rely on the City to tell us the specific names of people 274 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 who are covered by the plan. Now, we --
He's reported that, he says, at least five times. Now, could we find out if it's the City? And if it's the City, could you get on it? Stanley Shapiro, S-H-A-P-I-R-O, is the name. And "Stanley" is like "Stanley Hardware," only he's a lawyer. Could you find out where the fault is so he can get a card?
I certainly recognize the name. I was not aware of the problem. We will follow up on that.
You know, we feel silly raising it, but I know Manny Stamatakis were here, I'd call him on the phone, and he'd have the card within 48 hours, maybe hours. 21
Mr. Chairman, I can only 22 point out that you don't have to have the card to 23 get your prescription filled. You can go in and 24 give your name. It may take longer, but you can go in and get your prescription filled without 275 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 card.
Yeah, well, first they try on the computer to locate you, and then after about ten minutes, they tell you, Well, we can't locate you -- UNIDENTIFIED COUNCIL STAFF MEMBER: And, God forbid, you have a dependent who you need a prescription for.
Well, why can't we have a name -- may I request that without going to official committee action, can't there be somebody who is someone we can tell people -- we know if we have problems -- the reason that we point out our problems is not that we don't know how to get them solved. I know could have called the head of Rite Aid, one of the Grassos, father or son, and gotten him, you know, within hours. 21 But if we have trouble in the normal 22 day-to-day, think of what happens to employees 23 that don't sit on City Council of don't, you know, 24 have enough technical knowledge to know how to pursue it. Why can't there be a person in 276 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Philadelphia? You've got a big organization. Now, why can't there be a person, a consumer advocate if you will, whatever other name you want to give, that we could tell all employees, If you have any question, call this number and they will be able to respond.
I think that's something we could consider. At the moment, it's a telephone call. And it just so happens that the person who answers the telephone is not sitting in Philadelphia but is sitting elsewhere. They won't be -- we can't have a person in every store, a store manager.
No, we're not asking for that, just one person in Philadelphia. Manny Stamatakis was actually outside the City. He was in a county.
Well, I don't think Manny would like it if we suggested he's the person that every person should call.
Well, I'll tell you, he was awfully good at what he was doing.
Although he has enough phones. 277 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586
And maybe you could tell the Philadelphia head and maybe he could have it in his office.
But Mr. Hushen will tell you, in all seriousness, that we get calls at the customer service center. They are directed from the customer service center if the customer service person can't answer them. We get direct calls. We had an instance which Mr. Hushen was aware of where we had a person who had food stamps and was having trouble getting change made when they bought food items. And Mr. Hushen was called directly by the president of the company and asked to rectify the situation, and we rectified it. We can only deal with those things that we know about, and we try to do it quickly for everybody, including just ordinary people. They don't have to be Members of Council.
All right. That's good to hear, but if you could ever move away from 278 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 that form which lists all the for reasons, and for reasons 2 and 7, you're not getting paid, and you could write a normal letter saying, We believe we have paid this prescription, you know, and that's why we're not paying it again. . .
Only because it's late in the day, we would love to be able to do that, but I think the rate the City would pay us would have to go up because of the cost involved in doing things on an individual base like that, as crass as it is. I mean, you can't have -- it would take hundreds of people to stylize and respond to individual complaints. It can't be done economically for us, and therefore, for the City.
But you're working on some kind of on-the-ground, in-Philadelphia complaint response program.
Is the City 279 COMMERCE & ECONOMIC DEVELOPMENT - BILL NO. 970586 Solicitor going to. . .
No, we have spared the solicitor today. They've provided some good background information.
But the Solicitor wanted a representative to be here to provide any information that we might require, but I think we're okay. Thank you very much for participating. This hearing is adjourned to the call of the Chairs, recessed. Thank you. (Adjourned at 4:08 p.m.) - - - 280 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, May 21, 1998, were reported and accurately by me, and that this is a correct transcript of same. RE: JOINT COUNCIL MEETINGS ON COMMERCE AND ECONOMIC DEVELOPMENT COMMITTEE, COMMITTEE ON LAW AND GOVERNMENT BILL NO. 970845 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter