Health Care and Insurance

Can multilevel marketing cure high drug costs?: Texas firm passing out free drug discount cards in Indiana

October 22, 2007

Here's a new strategy to control spiraling drug prices: multilevel marketing.

That's right. A new company called NuLegacy International LLC is deploying the tactics of Amway Corp. to give Americans-particularly those without health insurance-a break on prescription drug costs.

The Texas-based company's key selling points? Its cards are free. And they're good for potentially large discounts off the full price of prescription drugs. Drugstores, in theory, get a higher volume of customers because of the discounts.

"The timing is now," said Virginia L. Edge, a Noblesville resident who is NuLegacy's independent distributor for Indiana. "It basically works for people that don't have insurance."

Edge makes money by collecting commissions on purchases made with the card. Like distributors for other multilevel marketers, she has an incentive to bring in ever-more recruits, since she gets commissions on their sales, as well as of the people they recruit.

But how much benefit NuLegacy can provide-to both patients and its distributors-is up for debate.

Stephen Barrett, a North Carolina doctor who's a common critic of multilevel marketing companies, doubts NuLegacy will be a boon for its distributors.

And John Cowan, president of the Community Pharmacies of Indiana, a trade association of independent pharmacy owners, doubts the NuLegacy card will be the best deal-even for most of the uninsured.

"A card like that, there really aren't that many people it's going to be useful for," said John Cowan, who also co-owns the Cowan Drugs store in Lebanon.

Cowan noted that Medicare Part D, approved by Congress in 2003, now helps seniors cover their extensive medication bills. In addition, large pharmaceutical companies fund patient-assistance programs that provide drugs free or at large discounts for low-income families.

Anyone with health insurance enjoys discounts the insurance company has negotiated with pharmacies. And some drugstore chains have their own discount card programs.

That's true, notes Edge, but few pharmacies promote their discount programs.

"The biggest difference about NuLegacy is, we're out there giving these out," said Edge, as she sat at a table in a busy Starbucks store in Fishers, flipping through a three-ring binder that details NuLegacy's plan.

NuLegacy has contracted with a pharmacy network that has negotiated discounts with 56,000 pharmacies nationwide, including major chains such as CVS, Kroger, Wal-Mart and Walgreens. NuLegacy touts discounts up to 75 percent, but Edge said a typical discount would run 20 percent to 40 percent.

IBJ tested one drug as an example. NuLegacy's Web site said its card would get a 90-pill supply of the cholesterol drug Lipitor, in 40 mg pills, for $343.06 at the downtown CVS store on East Ohio Street.

IBJ called that pharmacy and received a price quote for the same drug in the same quantity of $415.99. In that case, the NuLegacy card would save 18 percent.

The Centers for Medicare & Medicaid Services predicts prescription drug spending will rise 10 percent each year for the next decade.

Edge, 62, estimates she's passed out 1,000 cards since she began with NuLegacy four weeks ago. She hands them to patrons walking in and out of drugstores. She hands them to clerks at fast-food restaurants, to tellers at banks, and to other motorists while she's filling up her car with gas.

She even visits and writes to doctors. One wrote her back and asked for 100 cards to give to his patients.

"Anywhere I go, my cards go with me," Edge said. NuLegacy is her second attempt at multilevel marketing. She's also a representative for XanGo, a fruit juice dietary supplement launched in 2002 by a Utah company by the same name.

Edge doesn't yet know if any of her cards have been used to buy prescriptions. Each time they are, even for prescription refills, she'll get a 50-cent commission. Edge recently recruited another woman to distribute cards. Edge will get a bonus commission when someone uses one of the recruit's cards.

But since Edge is paying $39 a month for the rights and back-office support to be a NuLegacy distributor, Barrett doubts she can make enough 50-cent commissions to make much money.

"It doesn't seem to make sense," said Barrett, a retired psychiatrist who publishes a Web site called MLM Watch, which scrutinizes multilevel marketing firms.

Dr. Devin Holland, a former chiropractor who founded NuLegacy in Corinth, Texas, disagrees.

"We have [nearly] 50 million Americans that don't have any health care benefits," Holland said by telephone. He added, "It's just a great thing for people that don't have any assistance."

Holland declined to name the pharmacy network NuLegacy has a contract with. However, the names and numbers of participating pharmacies listed on NuLegacy's Web site matches those listed for New Yorkbased Agelity Inc., a pharmacy network formed in 1999.

Contracting with a network of pharmacies-or other health care providers-is a common practice in the world of health care benefits. Indianapolis-based Sagamore Health Network, for instance, rents its network of doctors and health care providers to other health insurers.

Sagamore agreed to sell itself this summer to Philadelphia-based health insurer Cigna Corp.

Holland did not respond to a written question asking if NuLegacy's corporate organization receives a commission for each prescription purchased with its discount card.

Multilevel marketing has a long history with health-related products. One of the first examples of multilevel marketing started in the 1930s when a California businessman created Nutrilite, a dietary supplement, and started selling it to his friends.

Nutrilite is still around. It's one of the products distributed by Amway's worldwide army of 3 million distributors.

For NuLegacy to succeed, it will have to carve out market space in an area already replete with discount programs.

"There's tons of discount cards," said Cowan, the drugstore owner. He added, "A few years ago, a card like this would have been more helpful."
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