The city insurance plan in LaFayette, Ga., gives two pharmacies a competitive edge, and one of those stores is owned by the mayor.
According to the employee benefits package, city employees have to pay twice as much for prescriptions they fill at Walmart, CVS and other chain pharmacies compared with those filled at two local independent stores, including the Medi-Thrift Pharmacy run by Mayor Neal Florence.
Under the policy, which officials said is about 6 years old, the city's approximately 130 employees have to pay $15, $30 or $50 for 30-day prescriptions at Medi-Thrift or Ledford's Rx Express Pharmacy in town. At a Bi-Lo, Fred's or other chain, they would be charged $30, $60 or $100 for the same drugs.
Florence, who has been mayor since 1989, said the policy doesn't force anyone to go anywhere.
"They can go to any pharmacy they want," he said in a phone interview. "I'm not sure if they get a better deal or not."
Complaints about the policy were first raised on the LaFayette Underground blog, which suggested the mayor's business interest might be the reason for the restrictions. When asked about the blog post, Florence said that if the Chattanooga Times Free Press portrayed the policy in a similar light, "I'll come after you."
He declined to comment further.
When told of the practice earlier this month, new City Manager Franklin Etheridge said he would look into the policy. He said he hadn't heard any complaints from employees, "but that doesn't mean we're not going to look at it."
Friday, Etheridge said he had met with MedAdmin Solutions, which administers the plan, and learned the company representatives negotiated the pricing five or six years ago.
"They tend to get lower prices with local pharmacies, so that's how they focus their program," he said.
He echoed Florence in saying employees aren't forced to get their medicine at any particular store, but acknowledged "obviously there's an incentive" to buy at the two independent shops.
Other cities give employees greater freedom on where they get their medicines.
In Rossville, City Clerk Sherry Foster said employees can go to any pharmacy that accepts Aetna insurance, which includes virtually all in the region.
Chickamauga, Ga., switched from BlueCross BlueShield of Georgia to Alliant Healthcare. But officials said all the plans cover purchases at Walmart, Walgreens, Bi-Lo, Chickamauga Drug Store and others.
"It's their choice," said City Manager John Culpepper. "I don't put any pressure on any employees."
Brenda Motheral, executive director of the Pharmacy Benefit Management Institute in Plano, Texas, said 26 percent of companies and other entities that provide prescription coverage for employees use "restricting networks" to lower costs. The "increasingly common" policies usually are put in place when the insurance provider negotiates price breaks with pharmacies, she said.
LaFayette's case is rare, however, because chains are normally the ones undercutting the independents' prices, Motheral said.
"Usually, if you see it, it would work the other way around," she said.
But if the independents are cheaper, the policy could be a way for LaFayette to save money.
"You hope that's what they're doing," she said.