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Duane Reade closes senior secured notes offering

BY Antoinette Alexander

NEW YORK Manhattan-based pharmacy retailer Duane Reade has closed its offering of $300 million of 11.75% senior secured notes due 2015.

“We are very pleased to complete this financing which reduces our leverage, improves our financial flexibility, and provides long-term capital support for the continued transformation of Duane Reade,” stated John Lederer, president and CEO of Duane Reade.

The notes were priced at 97.417%, representing a yield to maturity of 12.375%. The notes were issued in a private offering that was exempt from the registration requirements of the Securities Act of 1933.

The issuers used the net proceeds from the notes offering, together with a portion of the proceeds from a $125 million preferred equity investment by entities associated with Oak Hill Capital Partners, to purchase approximately $205 million of the issuers’ senior Secured floating rate notes due 2010, approximately $143.3 million of the issuers’ 9.75% senior subordinated notes due 2011 and pay any related consent fees in the issuers’ previously-announced cash tender offer for such securities and to optionally redeem approximately $5 million of the floating rate notes, which were not tendered in the offers, pursuant to the optional redemption notice given Monday.

The offer and sale of the notes have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent such registration or an exemption from the registration requirements of such act.

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Military cutting costs via Rx negotiations; NACDS hails finding as pharmacy victory

BY DSN STAFF

NEW YORK It was one of those clear “ah-ha!” moments that don’t come around nearly often enough.

 

In recent days, the Pentagon affirmed what the retail pharmacy industry has been saying all along: that leveling the playing field between community pharmacies and big, impersonal mail-order prescription outlets does more than just expand freedom of choice for military health plan beneficiaries, and eliminate a competitive disadvantage for drug retailers. It also saves the taxpayers money.

 

The proof of that assertion came with the Defense Department’s revelation that its TRICARE health benefit program for military members and their dependents is spending significantly less on prescription medicines than called for by original spending projections for fiscal year 2010. How much less? Roughly $1.67 billion, according to Defense Department projections.

TRICARE is squeezing those savings out of its expanded power to negotiate prices directly with drug manufacturers. Before its procurement rules were changed earlier this year, the military health program could only negotiate lower prices for drugs purchased for mail-order and military-base pharmacies. The result was higher prices for drugs dispensed to TRICARE beneficiaries who opted to have their prescriptions filled at a local drug store, supermarket or mass merchant pharmacy.

For years, retail pharmacy leaders have cried foul, arguing that the higher out-of-pocket costs put their stores at an unfair competitive advantage by steering the nation’s more than 9 million TRICARE beneficiaries to mail order and PX pharmacies. The industry won a huge victory when the Pentagon agreed that the old procurement system reduced freedom of choice for those patients.

The program’s expanded negotiating power will yield will result in “remarkable savings” for Defense, asserted NACDS president and CEO Steven Anderson.

The projected savings for TRICARE’s drug procurement program could also be enough to lend new ammunition to arguments by liberal lawmakers in the House and Senate who want to toughen the drug-price negotiating provisions in Pres. Obama’s health reform plan. As things now stand, the president is reassuring the pharmaceutical industry lobby that the White House will stand behind its earlier agreement to extract a maximum of $80 billion in negotiated savings from drug makers over the next decade for federal health programs.

Many Democratic lawmakers want far more, and they argue that direct and ongoing price negotiations with drug makers could save taxpayers additional billions. Are they looking at the savings wrung out of TRICARE’s expanded negotiating power? It’s a safe bet they are.

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Washington, Mo., considers repealing recently passed PSE legislation

BY DSN STAFF

NEW YORK The objective here is closing down clandestine methamphetamine labs. The question is: Who is going to bear the cost? And the answer, ultimately, is the consumer.

It seems that one of the primary reasons behind legislation like this, which is also under consideration by the California state legislature as well as several local municipalities throughout Missouri, is cost shifting.

Indeed, one solution that would prevent the practice of “smurfing,” a practice whereby meth addicts exceed their legal purchase limits in pseudoephedrine products by buying across several nearby pharmacies, is electronic logbooking. By granting access to PSE logbooks to law enforcement in real time, law enforcement officers would not only be made aware of a “smurfer” as they were driving between pharmacies, but would also identify who that smurfer was and where they lived.

Setting up that comprehensive electronic logbooking system requires resources, however. State coffers have traditionally been tapped for that purpose, and at least in the case of California, the Consumer Healthcare Products Association has offered to help defray that cost. In the case of Missouri, more than $500,000 has already been earmarked for the implementation of an electronic logbooking system at the state level.

However,  a not-as-much-talked-about cost is also borne by law enforcement, as pointed out by Franklin County Sgt. Jason Grellner in Missouri. After all, it requires additional resources to actually apprehend and prosecute those criminals, he suggested. And a system that better defines who those criminals may be, by his estimation, could cost the state as much as $350,000 per criminal per year.

Therefore, Grellner argues, it’s a fiscal responsibility to take PSE off the OTC market altogether, and require a prescription for the popular decongestant.

That, in a nutshell, is cost-shifting. Because reverse switching PSE translates into less revenue for retailers (and consequently less taxable revenue, as well) for those consumers who choose to forego PSE-provided relief, and for those who don’t, it’s a greater healthcare cost because now consumers have to schedule an appointment with their primary care practitioner and pay the co-pay for that doctor’s visit on top of the cost of the PSE product.

Regardless of how the consumer ultimately pays for the elimination of meth labs — whether through increased taxes to cover escalating law enforcement budgets or through increased personal healthcare costs — there is another argument to be made here. Switching PSE to prescription-only status may result in fewer meth labs busted, but it’s not going to do anything about those meth addicts still on the street. Necessity is the mother of invention, and for addicts, that simply means sourcing their meth from somewhere else.

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