WASHINGTON — John Standley, chairman and chief executive officer of Rite Aid Corp., knows firsthand the significance of the National Association of Chain Drug Stores to his company and community pharmacy overall as he gets set to take the reins as NACDS chairman.

John Standley

Standley, announced as the new NACDS chairman on Monday, succeeds Bob Narveson, president and CEO of Thrifty White Pharmacy.

In an interview with Chain Drug Review‘s Jeffrey Woldt at RxImpact Day last month, Standley cited the NACDS’ crucial role in representing members in the nation’s capital, something especially important for retailers that do not maintain a permanent presence here, and its ability to give chain pharmacy operators a collective voice.

He also pointed to NACDS’ success in providing effective forums for interaction among business partners — consumer goods suppliers as well as retailers.

Going forward, Standley said he’s intent on positioning NACDS to help members capitalize on opportunities in the changing health care landscape, while encouraging retailers and front-end suppliers to realize that "pharmacy and the front end need to work together to deliver their utmost in the marketplace today. Clearly, the consumer believes that this synergy is very important." Here is an excerpt of the discussion.

CDR: As you prepare to become NACDS chairman, how do you view the association?

STANDLEY: NACDS has been an important partner for Rite Aid. For a long time we really didn’t undertake any lobbying efforts in Washington, D.C., at all. We had some state efforts, but even those were not huge. So for a company like ours, NACDS has played a significant role through a period of rapidly changing regulations. We have relied heavily on NACDS to help us understand the issues, figure out the landscape and decide where to exert pressure and where to make our voice heard.

CDR: Rite Aid is a big company. If you relied on NACDS to that extent, the association must be even more vital to smaller companies.

STANDLEY: Has to be. Even more important, though, is the collective voice. Clearly, NACDS is built around grassroots efforts, and having a common voice is critical.

CDR: Is NACDS doing the right things and operating ­efficiently?

STANDLEY: Based on our relationship with the association and the help that NACDS has given us, we feel very good about the NACDS team, the way the organization is run and its effectiveness. We’re big ­supporters.

CDR: What are the issues you’re going to focus on as chairman over the course of the next 12 months?

STANDLEY: For me, the big focus is always on pharmacy, on how we can evolve the pharmacy model and on the additional things that pharmacy can do in the local community to provide health care. How are pharmacies going to get fair reimbursement for that? And how are pharmacies going to get fair reimbursement for our traditional dispensing businesses? With the passage of the Affordable Care Act and the changing health care landscape, it’s an important time for the industry, and there will be a lot of activity to try to move those efforts forward.

CDR: How do you view the implementation of the ACA so far? What might need to be changed?

STANDLEY: This will continue to play out as the enrollment progresses and more of the newly insured use their benefits. We’re paying a lot of attention right now to the implementation of other aspects of the Act —- which relate to Medicaid pharmacy reimbursement. It will be important for patients and for pharmacies, and for the entire health care delivery system, that the result is a viable model.

CDR: What are your concerns in those other areas?

STANDLEY: There is a general push by CMS [the Centers for Medicare and Medicaid Services] and HHS [the Department of Health and Human Services] to head toward more of a cost-based reimbursement model.

The AMP [average manufacturer price] rules are rumored to be released later this year. There is a lot of discussion about how quickly AMP can be rolled out. It takes a lot of work for states to implement AMP, and we want to make sure that, as states move toward more of a cost-based reimbursement model, the dispensing fees are accurately adjusted. NACDS plans to support a new study to demonstrate the importance of accurate dispensing fees.

If pharmacies just get their costs back, pharmacies remain at a loss for the totality of expenses incurred in dispensing — and it is not a viable business model for goods or services to be provided at a loss. And that’s the situation with the federal upper limits; a lot of states will try and migrate to an actual cost-based model. That’s where NADAC [national average drug acquisition cost] comes into play. And it’s the same issue with NADAC as it is with AMP: If pharmacies are going to be paid at cost, what is the rest of the formula?

CDR: It seems that there may be a gap between when the AMP rules are going into effect and when the state reimbursement formulas get adjusted.

STANDLEY: Yes. The question is how quickly will the states adopt AMP. There are 38 states that are not ready to roll here and cannot comply, due mainly to state regulations, even though the AMP rules are expected in the fall. So what is the right timing for putting all of this into effect? A number of groups have urged CMS to delay much of the cost-based reimbursement for one year. We agree with state Medicaid directors that there should be a year until AMP implementation once the states have what they need from CMS.

CDR: So it’s not up to CMS to adjust the dispensing rates.

STANDLEY: It’s really done state by state. So that leads to a whole set of activities that happen at the state level. It’s going to take all of us working together to help ensure dispensing fees are adjusted accurately by each state. One state recently announced that it was significantly adjusting its dispensing fee — taking a $1 or $1.50 fee and moving it up to $10.

Many states will be required to file with CMS to get approval before they can implement anything. So it seems that this issue will take a little longer to sort itself out than many had expected.

CDR: It complicates things for NACDS and its members to have to fight this battle on 50 fronts instead of one.

STANDLEY: It does.

CDR: So, would you like to see national regulation of pharmacy, as opposed to state-by-state regulation?

STANDLEY: My gut reaction to that is no. We may have a better chance of being more impactful on a state level than on a national level.

We generally have more success going to a state and making a case that is specific to the situation there, although it hasn’t always worked out.

CDR: Is the ACA still looking to be a net positive for ­pharmacy?

STANDLEY: I think it is. While we’re clearly concerned with an unfair reimbursement policy whenever AMP goes into effect, given that the demand for health care services will continue to grow, pharmacists can play a critical role in meeting the needs of patients, which will continue to increase.

CDR: So it may take a couple years to get the new system up and running?

STANDLEY: It seems that it will require at least another round of enrollments to get there. It’s hard to have any visibility into the Medicaid expansion. Patients are going to show up to some degree, but I’m not sure we’re going to know what it means until a little bit more time has gone by.

CDR: Would you expect more states to opt in over time?

STANDLEY: The states are trying to figure out ways to do that, and they are trying to get the federal government to agree to some different ways to get there. So it’s possible.

CDR: But obviously chain drug retailers would like to see the Medicaid pool be as large as possible.

STANDLEY: Conceptually, yes. The more people that have coverage, the more likely they are to stay healthy and use that benefit, which is good. They’re interactive with their health care. That’s what we want. We don’t want them to wait for a medical emergency and go to the hospital.

CDR: How does the Affordable Care Act relate to the goal of expanding the scope of pharmacy practice?

STANDLEY: One of the key provisions of the Affordable Care Act is a focus on changing reimbursement models for other health care providers so that they are more concentrated on outcomes. That brings the focus back to pharmacy, because when you think about health care models, who touches the patient most often? The ­pharmacist.

So that opens up different types of opportunities, and we are seeing a lot of interesting partnerships with other health care providers — Walgreens, CVS and Thrifty White have undertaken some interesting programs, and at Rite Aid we have brought our own model to market. The ACA is causing providers and other members of the health care community to take a different look at pharmacy and better understand the value that pharmacy brings to patient care. That’s going to continue to fuel the growth of different types of health care delivery models.

CDR: Under Rite Aid’s model, where will the payments come from for the new services?

STANDLEY: We believe it’s going to be a gain-sharing model when it reaches maturity. We think that through Rite Aid’s pilots, we will be able to illustrate that we’re significantly improving outcomes. Our goal would be to be a partner in a gain-sharing model with someone who is being compensated based on outcomes.

By showing the impact that we’re having on those outcomes, and how our partner would benefit in terms of the payment model, we would indicate that some portion of that benefit would flow back to Rite Aid. In addition, if you think about it conceptually, our partners will be sending us more of the types of patients who are big pharmacy users. So the other side of this is that it gives us more face time with important pharmacy patients.

CDR: How important is it for pharmacists to be recognized as health care providers, to make all that you just talked about a reality?

STANDLEY: I think it’s significant. As providers, we could have even more opportunities to interact with patients and help to ensure medication adherence. We could more actively help patients manage different health issues, such as smoking cessation.

CDR: Do you think that would open the door to expanding the scope of services allowed in a retail pharmacy?

STANDLEY: We still have to remain inside the state scope-of-practice laws. We’re not going to become primary care physicians, but the new focus on improving outcomes could provide economic incentive for pharmacies to continue to expand relationships with
patients.

There could be a high return on investment — for those who are willing to make that
investment.

CDR: NACDS has talked a lot about the need to own medication therapy management. Where do things stand on that initiative and whatever additional legislative steps might need to be taken?

STANDLEY: Right now, we continue to actively promote the Medication Therapy Management Empowerment Act of 2013, a bill that would provide access to medication therapy management services for patients facing one or more disease states. Pharmacists would have a much larger population of patients to work with, which could be very effective in reducing health care costs. Simply put, the legislation would help increase the number of seniors taking their medications as prescribed, which will help reduce the risk of further illness and in turn help control health care costs.

CDR: Does NACDS have enough results from the MTM research that it has been conducting to make a quantifiable case about the positive impact of MTM?

STANDLEY: Yes. And there is data that shows it is improving patient outcomes. Just over the past year, the floodgates have really opened, with journals like Health Affairs and several others publishing articles about the positive benefits of MTM. The Congressional Budget Office and CMS also have made powerful statements and policy decisions that reflect growing interest in focusing on medication adherence as a way to improve health and improve health care affordability.

CDR: Congress recently passed supply chain legislation [the Drug Quality and Security Act]. How does the act affect your business and the pharmacy patient?

STANDLEY: For this issue, I think it’s better to be regulated federally; otherwise, we could have a whole variety of different state standards to comply with.

For the patient, it’s really about safety. The new law will be important if there is an issue with direct supply or the ability to track it backwards and see where the exposure is.

CDR: You recently participated in NACDS RxImpact Day. What points did you and the other pharmacy advocates stress to policy makers?

STANDLEY: NACDS RxImpact Day was very effective. We aimed to storm Capitol Hill. Rite Aid alone brought nearly 100 people. Having that many people on Capitol Hill on the same day, and all talking about our issues, really makes pharmacy top of mind.
At the event I made it a point to discuss reimbursement rates, proposed rules under CMS for Medicare, provider status and the MTM bill pending before Congress.

CDR: Is the goal to spur immediate action, or is it to make lawmakers more aware of community pharmacy and the issues that relate to it?

STANDLEY: It’s probably some of both. On RxImpact Day last year, we were focused on the MTM legislation. While we were in Washington, we actually were able to get sponsors for the bill. Senator Kay Hagen [D., N.C.] and Congresswoman Cathy McMorris Rodgers [R., Wash.] were already on board, but by the time we were done, we had probably 30 or 40 people talking about the bill, who then quickly signed on, and today we have nearly 200 sponsors.

The effort that we put behind that bill last year was very effective in moving it along, so RxImpact Day can have an immediate impact. But it always serves to keep pharmacy top of mind and keep the issues fresh.

CDR: We have talked some about the states. Besides the big question of reimbursement, what are the state issues that are on NACDS’ radar screen?

STANDLEY: There is a fair amount of action all the time at the state level. NACDS can’t always take the lead, but we can be helpful. We do strategic planning, in which the association tries to look at the issues that are developing, look at the states that are active, look at the states where we believe there is the most opportunity or exposure and then prioritize the efforts in those states. The NACDS membership goes through a process to help them set those priorities.

CDR: Are there two or three hot-button issues in the states right now?

STANDLEY: Reimbursement is still the top state issue. But there is a range of others, from pseudoephedrine to provider status.

CDR: The big change last year in NACDS’ non-pharmacy activity was Total Store Expo. What sort of reaction did the association receive from attendees? Do you see the show evolving beyond what it was a year ago?

STANDLEY: The reception was very positive. Combining three meetings into one was certainly a plus. The show was very effective in enabling both pharmacy companies and their partners to work together — when you had your whole management team there, you could get a lot done. I believe the positive response rate was over 90%.

NACDS is working to bring more innovation to the show. Plans are in effect to make it more interesting and exciting.

CDR: Beyond the shows, what is NACDS’ current relationship with front-end suppliers that are associate members? What might be done to broaden that relationship?

STANDLEY: NACDS is involved in some legislative and regulatory issues that relate equally to the front end and pharmacy. But it is also important for pharmacy chains, and even independents, to realize that pharmacy and the front end need to work together to deliver their utmost in the marketplace today. Clearly, the consumer believes that this synergy is very important.

NACDS continues to focus on helping our front-end partners understand that there is some legislative and regulatory benefit to our activity, and that the meetings are effective and a good use of time. We need to show our front-end members that supporting NACDS, which plays such a key role in driving pharmacy, is a good investment for them and helps make our entire industry work.

CDR: Do you foresee adding services or programs that deal more with the front end?

STANDLEY: There are legislative issues that come up from time to time that focus on the front end. But I think NACDS’ primary policy focus will remain the pharmacy. But in other areas of member service, you’ll see continued focus on the front end and pharmacy alike. An example is everything that NACDS has done with its Retail Advisory Board. This group — which includes a lot of representatives from front-end suppliers — is helping raise awareness of developments from unique merchandising to technology’s impact on today’s consumers.

CDR: Maybe you could talk briefly about the NACDS Political Action Committee [NACDS-PAC]. We have an election coming up in the fall. How does NACDS-PAC approach its work and determine the candidates it supports?

STANDLEY: The work of NACDS-PAC is primarily driven by NACDS’ overall strategic planning — what are the issues we’re trying to address, and how do we address them most effectively?

CDR: How do you view the assignment that you’re now taking on at NACDS?

STANDLEY: It has been a great experience for me to be involved with NACDS. I’m excited and honored to have the opportunity to represent the industry, and we’ll see where we go.

*To read the full interview with John Standley, please see the April 28, 2014, print edition of Chain Drug Review.