Walmart Wants to Overturn North Dakota’s European-Style Pharmacy Laws

It's the only state that effectively bans chain stores from owning pharmacies. Voters could change that this week.
by | November 3, 2014

ELECTION 2014: This article is part of our coverage of ballot measures to watch.

As the nation’s shopping plazas, street corners and strip malls have filled with chain pharmacies over the last half century, North Dakota has successfully kept them out. But the only state that restricts ownership of pharmacies to licensed pharmacists could see its law overturned Tuesday through the ballot box.

North Dakota’s 1963 law effectively banned chain pharmacies from the likes of Walmart, Walgreens, and Kmart, all of whom are backing a ballot initiative to repeal the law. They argue opening the market will lower prices and improve access for a population that’s growing rapidly with the shale oil boom. Opponents argue the exact opposite.

This is not the first challenge to North Dakota’s pharmacy ownership law. The U.S. Supreme Court upheld it against a challenge from Snyder's Drug Stores (a pharmacy chain later absorbed by Walgreens) in 1973. The legislature has taken up the issue repeatedly, twice in the past five years alone. Over that period opponents of the law have also tried to get the issue on the ballot, twice unsuccessfully before now.

North Dakota is alone among U.S. states, which at one point had many similar laws, but several European countries do restrict drug store ownership to pharmacists. Those laws, active in about 10 countries, were upheld by a European court in 2009. France, Germany and Italy are among them, while England and some northern European nations have much more liberalized ownership laws.

With the help of pharmacy giants, the group North Dakotans for Lower Pharmacy Prices has more than $2 million to spend in a state of 720,000 people. They’re trying to make the case, with the help of a local public affairs firm, that North Dakota’s restrictive laws have driven up prices.

A report from two economists commissioned by the group found that prescriptions cost $85.87 on average, more than the $57.31 in South Dakota and higher than other neighboring states. The report compared Kaiser Family Foundation data on per capita expenditures and use. The two economists also found North Dakota’s average price for the top 55 most-dispensed drugs is more than twice the national average.

“We’re not saying everyone has to shop at a chain store -- we’re saying if you open up the market all the pharmacies would need to lower their prices,” said Amanda Godfread, a spokeswoman with the public affairs firm Odney.

But a think tank that encourages independent ownership of local businesses points out that the group doesn’t specify where the data for most-dispensed drugs comes from. The Institute for Local Self-Reliance has its own report finding North Dakota has had the 13th lowest pharmaceutical prices on average over the last five years, lower than both South Dakota and Minnesota. It cites data from Symphony Health’s PHAST Prescription Monthly, which is used by major financial research companies.

The institute also argues that access to pharmacies has actually been better under North Dakota’s law than in neighboring states or even nationally, citing U.S. Census and pharmacy board data. North Dakota has 2.45 pharmacies per 10,000 people, compared with a 1.88 national average. The institute also maintains that without North Dakota's law state residents would suffer from a loss of interaction and patient education. The state might also lose many rural pharmacies already operating on thin profit margins.

“Right now, you’re not going to go to an independent pharmacy in Fargo, but if it’s a one-stop trip you’ll probably get your prescriptions at Walmart, and the question from a public policy standpoint is many are still relying on those local pharmacies for things like antibiotics for small kids, [so] is preserving them a worthy public policy goal?” said Stacy Mitchell, a researcher at the Institute.

Both groups cite competing consumer surveys to argue the quality of service at each is superior, but there’s no evidence that chain pharmacies offer inferior care, said Albert Wertheimer, a Temple University professor of pharmacy and the former director of the school’s Center for Pharmaceutical Health Services Research. After all, he said, those stores are still run by licensed pharmacists with reputations to maintain, even if they’re not owned by them.

Prices aren’t likely to move up or down, at least for consumers, who often only have small co-payments for their prescriptions, Wertheimer said. “On the prescription prices, those chain stores, even if they could drive a lower price from the wholesaler it wouldn’t make a big difference to the consumer,” he said.

Will this be the year the chain stores overturn North Dakota's law? The only opinion poll on the issue has opponents like the Institute For Local Self-Reliance leading about 39-35, but 26 percent of voters are undecided.