HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Monday, August 6, 2007

Independent Pharmacists and Medicaid Drug Reimbursement

McClatchy News reports on the concern many independent pharmacists have concerning the new Medicaid drug reimbursements.  It states,

For Mark Williams, it's a simple business proposition: He can't afford to  sell medicine for less than what he paid for it.  But he says that's what Washington expects him to do, come January. . . .

It's a common warning from the nation's community pharmacists, who have been watching their ranks dwindle in recent years. Now they're looking for help from Congress, fearful that reductions in the amount the federal government reimburses them for Medicaid drugs will drive more of them out of business.

Yet much more than the livelihood of pharmacists is at stake.  If the changes proceed, critics warn, tens of thousands of Americans who depend on Medicaid could be denied life-saving drugs or forced to drive long distances to get them. Medicaid is the federal-state program that subsidizes health costs for 53 million low-income people and those with disabilities. . . .

Kody Krien, who runs Krien Pharmacy in St. Francis, Kan., is among those who are ready to stop serving Medicaid patients if necessary. "If they set it below cost, I'll just drop them," he said. "The sad thing is those Medicaid people are going to have to drive 40-50 miles to get medicine. .... And those people, they can't afford to drive anyway. That's why they're on Medicaid."

Faced with growing competition from big chains and mail-order pharmacies, 1,152 independent pharmacies across the United States were sold or closed in 2006, according to statistics gathered by the National Community Pharmacists Association. . . .

The uproar is caused by fallout from the Deficit Reduction Act of 2005, which was passed by Congress and signed into law by President Bush. It forced the Centers for Medicare and Medicaid Services (CMS) to come up with changes in the government's complicated reimbursement formula as a way to save $8.4 billion. . . .

Critics of the new rule say it would reimburse retail pharmacies at an average rate of 36 percent below their costs. That's based on a December report by the Government Accountability Office. The new rule would base reimbursements for more than 500 generic drugs on the average manufacturer price. Currently, they're based on average wholesale prices.

Government officials are defending the new system.  "We don't agree with some advocates who claim that the new rule will put pharmacies out of business," said Mary M. Kahn, CMS spokeswoman.  She said that states "were greatly overpaying for many drugs, especially generic drugs." And even with the new changes, she said, pharmacy revenues from the Medicaid program will decline by less than 1 percent over the next five years. . . .

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