MEDICAID BUDGET CUTS RILE RETAILERS

QUINCY, Mass. -- Retailers are fighting proposals in two states that would drastically cut Medicaid reimbursement rates.Supermarket pharmacies like Stop & Shop Supermarket Co. here, along with major drug chains Walgreens, Deerfield, Ill.; CVS, Woonsocket, R.I.; and Brooks Pharmacy, Warwick, R.I., denounced the Massachusetts state government's plans to trim prescription reimbursement rates by 11%.

QUINCY, Mass. -- Retailers are fighting proposals in two states that would drastically cut Medicaid reimbursement rates.

Supermarket pharmacies like Stop & Shop Supermarket Co. here, along with major drug chains Walgreens, Deerfield, Ill.; CVS, Woonsocket, R.I.; and Brooks Pharmacy, Warwick, R.I., denounced the Massachusetts state government's plans to trim prescription reimbursement rates by 11%. Governor Jane Swift announced the state's reconsideration of the intended cuts last week after CVS withdrew from participating in the state's Medicaid program, and Walgreens and Brooks threatened similar measures, according to published reports.

The state also enacted a new requirement that pharmacies had to give 30 days' notice before withdrawing from the state's Medicaid program.

"The industry voiced its concern, and when retailers starting pulling out of the program, it caught government's attention," said John Fegan, vice president, pharmacy, Stop & Shop. The supermarket retailer is in the midst of evaluating the situation, he said.

"If it's a nonprofitable plan, we would make the decision we have to make," he added, such as cutting store hours if necessary. "We're biding our time at this point."

Under the current plan in Massachusetts, retailers are reimbursed 10% above their wholesale acquisition costs from Medicaid, said Fegan. Retailers would be reimbursed 2% less than their wholesale cost under the new proposal. Additionally, the new plan calls for patient co-payments to rise from 50 cents to $2.

Furthermore, pharmacists are not allowed to turn away Medicaid patients who cannot afford the co-payment. The price hike would likely increase the number of patients receiving medicine without having to pay, which would be another indirect financial cut to retailers, said a source at the Massachusetts Pharmacists Association, Waltham, Mass.

The drug chains that temporarily threatened to pull out of servicing Medicaid customers -- Brooks, CVS and Walgreens -- will continue to fill Medicaid prescriptions until Oct. 2 when a final decision about the cutbacks will be made. In the meantime, a public hearing re-examining the cutbacks is set for Sept. 5.

Massachusetts projected a $60 million savings per year if government followed through with the proposed cuts, according to reports.

In a similar measure, Washington state has followed Massachusetts in drastically reducing Medicaid reimbursements for pre- scription drugs, according to published reports.

Walgreens has said it will weigh its options, such as reducing store hours. The drug chain has 48 stores in Washington state. The current reimbursement standards in Washington state are the average wholesale price minus 14%. Specifics on further reimbursement rate decreases were unavailable.

Reduced store hours "would offset the money lost through reduced reimbursements," said Carol Hively, spokeswoman for the drug chain. Walgreens has no immediate plans to reduce store hours in Washington or Massachusetts or any other state however, she said. "Our goal is to continue to work with the states," she said.

About 40 states are proposing Medicaid cuts, said Crystal Wright, spokeswoman for the National Association of Chain Drug Stores, Alexandria, Va.