Initiatives squeezing independent pharmacists

Michael Smith packed it in at the beginning of last year after some 26 years in the business, leaving Ossipee without an independent pharmacist.

“You can only sell loss leaders for so long,” he said. “Some people will pack it in sooner. Others later. I left sooner.”

Smith left before the pending triple whammy that will be hitting all New Hampshire pharmacists, particularly independents, over the next few years:

– The state Department of Health and Human Services’ decision to cut its rate of Medicaid reimbursements.
– Gov. Craig Benson’s efforts to obtain a federal waiver so he can encourage citizens to bypass local pharmacies and buy prescription drugs from Canada as well as enabling the state to do the same when purchasing drugs for state workers and prison inmates.
– The new Medicare prescription drug law, which puts the program in the hands of managed care companies that have been cutting their reimbursement rates for years.

Those three changes are a bitter blow to independent pharmacists, whose ranks in the state have declined from more than 200 to under 40 in a little more than a decade. They will particularly hurt those pharmacists who serve a poor and elderly clientele — and those pharmacists tend to be independents. The poor, since the state primarily pays for the drugs through Medicaid, shop more on service than on price. And the elderly depend on the extra counseling and delivery that independents offer.

One such independent pharmacist in the upper Seacoast area said that the latest changes will be “devastating to pharmacists. The chains wiped out most of us. This will wipe out the rest of us. I doubt I’ll be able to survive this. I’ll suck it up for a while, but I’ll either have to get out or lose my business.”

“The governor understands the pharmacists’ concerns,” said Wendell Packard, Benson’s spokesperson. “But this is a matter of public health, and providing drugs and the necessary medication for the people that need it so they can afford them.”

Packard referred questions about the Medicaid cuts to the Department of Health and Human Services, but officials there did not return phone calls. In the past, Commissioner John Stephen has said he is simply obeying the law.

“The law says that the state must be given the best prices, and I believe this rate change reflects that,” he told Foster’s Daily Democrat after word of the Medicaid reimbursement cut emerged. He referred to the cut as a way to “maximize the taxpayer’s dollar.”

Some serious thinking

On paper, the Medicaid cuts seem minor. The discount that pharmacists have to swallow went up from 12 percent to 16 percent — 4 percent, as HHS likes to emphasize. But in reality, say pharmacists, they are making 20 to 25 percent less than what they previously were getting.

Furthermore, the state also instituted a dispensing fee cut and the Medicaid co-pay has been doubled. Unlike private-pay clientele, Medicaid patients who don’t make their co-pay can’t be refused medication.

One third can’t or won’t pay, so the pharmacist has to swallow that loss, said David Minnis, a representative of the New Hampshire Pharmacists Association,

The Medicaid cuts have to be viewed in a larger context: Insurance companies have continually been reimbursing pharmacists less and less for their services.

The state pharmacy association is planning to challenge the legality of the cuts, citing a provision in the budget law that says the state can’t change the Medicaid reimbursement rate without negotiating with providers, or without the approval of the legislative fiscal committee.

Neither of those conditions has been met, said Minnis.

It’s more than Roger Hebert, owner of Rice’s pharmacy in Nashua, says he can afford. About a third of Hebert’s patients are on Medicaid, so after the HHS decision, he announced that he will not be accepting new Medicaid patients.

“We can’t hire the new staff to increase business in that area and do it right,” he said. “I owe it to my existing customers to continue serving them, but if I was starting a pharmacy from scratch there is no way I’d take Medicaid today.”

David Rochefort, co-owner of the Sullivan Drug Store — a fixture on Lancaster’s Main Street for more than a century and a half — also has to do some serious thinking about how to continue to service Medicaid patients, who also account for about a third of his customers.

Rochefort had turned down a contract from Anthem Blue Cross and Blue Shield — the state’s largest health insurer — because under the state’s previous reimbursement policy, a pharmacy would have to give the state its best discount. Anthem’s discount was so large that Rochefort couldn’t afford to pay the same rate to his Medicaid patients as well. But under the latest policy, he would have to accept that low rate anyway.

“We have to examine the numbers to see how this will affect our cash flow,” said Rochefort. One possibility would be not to accept Medicaid patients. The other is to cut back services.

“We do a lot of free delivery, mostly to older people who can’t get to the store easily. We might have to end that, or start charging for delivery,” he said.

Medicare changes

The proposed Canadian prescription drug program, compared to the Medicaid cuts, is not as severe, said Henniker Pharmacy owner Joe Clement, adding that some customers have already turned to mail order and the Internet to fill their prescriptions.

Still, the governor’s attempt to win federal approval to set up a Web site enabling New Hampshire residents to buy Canadian prescription drugs is an outrage, said Hebert.

“I think the role of government is to protect me from unfair business competition, not to encourage all that business to go out of the state,” he said.

Some pharmacists joked that maybe they should move to Canada so they can sell cheap foreign drugs with a strong mark-up.

“They are selling them cheaper than we are buying them for,” said Rochefort. “If I was able to buy in Canada and resell them, I could make a lot more money than I do now.”

The pharmacists, however, contend that the drugs being sold out of Canada are not safe or reliable.

Looming over all of this is the implementation of the Medicare prescription drug law passed last year by Congress.

Most of the coverage has focused on two aspects: How the bill benefits pharmaceutical companies (the federal government is barred from negotiating with them to obtain their lowest price) and how the program may or may not benefit seniors. Little attention has been paid to the effect the law will have on pharmacists, on whom the program will be centered.

The Medicare law will be implemented in two phases. The first phase is a discount program, which starts in June. The second is a benefit program, which won’t begin until 2006. Both programs will be primarily run by pharmacy benefits management companies, or PBMs, which manage drug purchases for insurance companies and self-insured companies.

PBMs have recently come under fire for actually increasing prescription costs. For instance, the U.S. government has recently filed suit against one PBM — Medco Health Solutions Inc. — for, among other things, shipping medications and billing patients for drugs they never ordered, creating false records of contact with physicians and soliciting and receiving inducements from pharmaceutical manufacturers to favor their products.

Under private insurance, the PBM comes attached with an insurer. Under the Medicare law, patients will chose their benefits manager at the pharmacy. This puts pharmacists in a better position to influence choices, and the national pharmacists association is trying to take advantage of it by putting forth its own management company, starting with a discount card program.

Still, it’s unclear whether the pharmacists’ plan will be approved, and even if it is, if it will be able to counter the incentives that the PBMs are expected to roll out over the next few months.

Medicare recipients will have to choose between 40 such plans and would be locked into that choice for a year. Pharmacists don’t have to accept them all, so seniors will have to be careful which PBM they choose.

The benefits program, however, will be awarded to two or more PBMs on a regional basis. There will be a monthly premium, a $250 deductible and a $3,000 “gap” (after the first $2,250), when the recipient will have to pay out of pocket.

And it is questionable whether most pharmacists will benefit by serving those Medicare patients. Look what happened after PBMs started working with HMOs.

“They guarantee you x amount of business, but they cut reimbursements a little more, a little more, and soon you are doing a lot more work for less money,” said Rochefort.

Others question where the savings is going to come from. The pharmaceutical companies made sure that it wasn’t going to come off them, “so there isn’t anything left except for what you take out of the hides of the pharmacies, which are already so squished that there’s not much left,” Clement said.

All of these changes make pharmacists nervous.

“It will be an interesting two years,” said Hebert, the Nashua pharmacist. “There is a potential for a number of pharmacies to go out business, including ours.”