Reimbursement cuts assailed by pharmacies
The federal Centers for Medicare and Medicaid has announced plans to decrease the reimbursements paid for generic drugs that it pays to health-care providers starting July 1, but at least some New Hampshire pharmacists say that the action could force them to cut back on services and even turn away Medicaid patients.
“The numbers just don’t add up,” said Mike Smith, a director of the New Hampshire Association of Pharmacists. “Essentially what CMS did is left out the wholesaler’s mark-up in drug costs to the pharmacist.”
The cut in reimbursements is part of the Medicaid Deficit Reduction Act of 2005, which is designed to save as much as $8.4 billion in state and federal funds over five years in drug benefits alone.
The Government Accountability Office reviewed CMS’s cost-containment strategy in its December 2006 memo, “Outpatient Prescription Drugs: Estimated 2007 Federal Upper Limits for Reimbursement Compared with Retail Pharmacy Acquisition Costs.”
The agency said it had “significant concerns” with estimates on drug costs, namely that the average manufacturer prices it used to calculate its upper limits for deciding reimbursement were found to be 36 percent lower than average retail pharmacy acquisition costs.
Smith, who lives in Conway, worked as a pharmacist for 30 years and retired from owning a store two years ago to become a lobbyist for issues pertaining to the pharmacy profession.
He said changing patient populations are adding insult to injury with declining reimbursement levels, at least in his experience in the North Country.
“It used to be a certain percentage of patients had insurance and a certain percentage didn’t. Now less than 10 percent have private insurance. They pay a co-pay up front. The remainder is paid by a contractual agreement, which may or may not pay the costs,” he said.
The Medicaid program is a federal- and state-funded program serving individuals and families who meet financial and other eligibility requirements and certain other individuals who lack adequate resources to pay for medical care.
Ron Petrin, a pharmacist at Bedford Pharmacy, said most pharmacies have had their reimbursements “cut right to the bone.”
“Every plan that comes out keeps chinking away at pharmacists’ abilities to stay in business,” said Petrin. “Most of these plans are penny-wise and pound-foolish. We’re not making money on prescriptions anymore.”
Roger Hebert has been a pharmacist for over 20 years, and currently owns Rice’s Pharmacy in Nashua.
“Our wiggle room is pretty much zero,” he said. “With the cuts Medicaid has proposed in generics, I predict a number of pharmacies will drop out of the program.”
Hebert said about a third of his sales is in generic drugs and about 18 percent of his patients are on Medicaid.
“It used to be possible to make up profits with other payers, but now it’s impossible. The vast majority of payments are direct billing by insurance companies or Medicare,” said Hebert.
Smith and Hebert agree that it is probably only a matter of time before private payers will follow suit and lower their reimbursement levels as well.
“The only way reimbursements have changed in the past is to go down,” said Hebert. “You saw pharmacies starting to go out of business with Medicare. You’ll probably see more close when these cuts go through.”
All of the pharmacists contacted by New Hampshire Business Review said if the new lower Medicaid reimbursement levels are not changed, pharmacists might stop accepting Medicaid patients — a move health-care providers have been loath to make.
While Hebert said he doesn’t anticipate shutting his doors, he said he would have to look at what services he offers for the health of his own business.
“This pharmacy has been around since 1868,” said Hebert of Rice’s. “It would be a sad day if we had to get out of serving Medicaid patients.”
Petrin said Medicaid patients would end up going to the emergency room as a last resort, which would only continue to raise health-care costs.
“Who does that help?” Petrin asked.