Pharmacy Could Lose Medicaid Margins

WASHINGTON Retail pharmacy is once again facing lower margins as a result of proposed cuts to Medicaid reimbursement. Late last month, the Centers for Medicare and Medicaid Services, Baltimore, recommended cutting the Medicaid program by $8.4 billion over the next five years by taking the majority from reimbursement to pharmacies. The public has until the second week of February to comment on the

WASHINGTON — Retail pharmacy is once again facing lower margins as a result of proposed cuts to Medicaid reimbursement.

Late last month, the Centers for Medicare and Medicaid Services, Baltimore, recommended cutting the Medicaid program by $8.4 billion over the next five years by taking the majority from reimbursement to pharmacies.

The public has until the second week of February to comment on the proposal, which is a provision of the Deficit Reduction Act of 2005 and limits reimbursement rates on generic prescription drugs.

“The bottom line is many pharmacies will experience a loss each time they dispense a generic drug under this rule,” Ty Kelley, director of government relations for the Food Marketing Institute, Arlington, Va., told SN. “FMI will be submitting comments criticizing the proposed change and what it will mean to retail pharmacy and Medicaid beneficiaries.”

Under the rule, retail pharmacies would lose an average of $3 to $4 for every generic prescription dispensed to Medicaid recipients, possibly forcing some pharmacies to drop out of the Medicaid program, said Bruce Roberts, executive vice president and chief executive officer of the National Community Pharmacists Association.

For beneficiaries, “If pharmacies are forced out of the program, prescription access will become a problem for 55 million of the most vulnerable among us,” said NCPA spokes-woman Carol Cooke.

With the new law, federal calculations of drug prices would be determined by the average manufacturer's price (AMP), the price manufacturers charge wholesalers. Currently, the pricing is based on the average wholesaler's price (AWP), the price wholesaler's charge pharmacists for drugs.

The AMP is likely to be lower than the AWP, reducing the amount the government reimburses retail pharmacy.

Last year, the Budget Reconciliation Act of 2005 cut $3.6 billion from retail pharmacy by putting an upper limit on the amount pharmacies can be reimbursed for generic drugs under Medicaid.

This year's use of AWP includes average prices charged to plan benefit managers and mail order services, Kelley said. “Retail pharmacy does not get the same prices that they get. They get lower prices. So including those classes of trade in the calculation is, in our opinion, totally unfair.

“The way the rule is constructed, it only applies to generic drugs and in a very perverse way would be a disincentive for pharmacists to dispense generic drugs to Medicaid recipients,” Kelley said. “So you would think that the government would want to maximize program savings and encourage the use of lower-priced generics, but this rule could actually cost more than it saves.”

The cuts may also force some pharmacies to reduce hours or curtail services, according to the national Association of Chain Drug Stores, Alexandria, Va.

In addition, about 25% of prescriptions filled at independent pharmacies come from Medicaid recipients because more than 50% of those pharmacies are located in rural communities, Cooke said.

“We are very disappointed that [President Bush] would force such an anti-small business measure on pharmacists,” Roberts said. “If patients don't have access to the medicines that control their diseases, you will see higher overall costs from increased doctors' visits and hospitalizations. This move is shortsighted and dangerous.”