Pharmacists are keeping a wary eye on national and state lawmakers as they wait to see how a new Medicaid prescription drug reimbursement rule will be implemented.
Conceived earlier this year as an effort to reign in soaring drug costs, the rule changes the formula for determining how much pharmacies will be reimbursed by Medicaid for 500 generic drugs. The new formula will save states and the federal government $8.4 billion over the next five years, according to the Centers for Medicare & Medicaid Services, or CMS.
That savings may have side effects. Although CMS disputes it, the federal General Accountability Office stated earlier this year that the rule would cause pharmacies to be reimbursed at 36 percent below their cost for purchasing the drugs.
"What a deal," said Jeff Sigler, owner of Sigler Pharmacy, 4525 W. Sixth St.
The rule initially was to go into effect July 1, but CMS last month said it would delay its enforcement until January. Early in June, a letter prepared by the office of U.S. Rep. Nancy Boyda, D-Kan., was sent to CMS requesting a delay. It was signed by more than 100 House members, including all four Kansas representatives.
The House letter requested additional time to study the complexities of the rule so states can develop plans to address pharmacists' concerns. Medicaid is mostly federally funded, but states administer it.
During a nationwide telephone media conference last week, Doug Hoey, senior vice president and operations officer for National Community Pharmacies, described the new Medicaid rule as "an absolute travesty." NCP represents the interests of independent pharmacies. Many independent pharmacies, mostly in rural areas, have 50 percent or more of their business from customers on Medicaid, Hoey said.
"In all probability, unless the rule is changed, it will be very difficult for any of these pharmacies to stay in business," Hoey said.
The new Medicaid rule was mandated by the federal Deficit Reduction Act of 2005. The rule changes the reimbursement formula from being based on the average wholesale price to being based on the average manufacturer price. The change was made after a Health and Human Services report stated that wholesale prices were inflated.
Pharmacies - chains and independents - will take a financial hit from the reduced reimbursements. The power of that punch depends on the number of Medicare customers they have. Some northeast Kansas pharmacists say they are still determining how the rule will affect their business. The size of the chain pharmacies will allow them to absorb the reimbursement drop more easily.
Customers on Medicaid make up 10 percent to 15 percent of the business at the Country Mart pharmacy in Tonganoxie, owner Eric Finkbiner said. Last week Finkbiner took over a second store, Oskaloosa Pharmacy in what is now Parker's Hallmark and Gift store. He isn't sure what the percentage of Medicaid business is in Oskaloosa.
"I don't think it is going to be anywhere near the dreaded 50 percent mark," Finkbiner said. "I'm hoping that it's not going to be more than 25 percent."
Sigler said he is concerned about senior citizens on Medicaid who may be left without a pharmacy. In addition to those that might go out of business, other pharmacies that can't afford or won't accept the losses could stop accepting Medicaid customers. Moreover, the quality of service at some pharmacies may go down, Sigler said.
"The reason I say that is because if you operate at a loss, the cuts have to come from some place, and it usually comes from staff," he said. "If (remaining staff) are overworked they are more likely to make errors."
John Glassman, director of Douglas County Senior Services, 745 Vt., said he is glad the six-month delay in enforcing the new rule will give lawmakers a chance to find a better option.
"It's always better to talk to the people who are going to be affected by this before you implement something unilaterally," Glassman said.
One option the Kansas Legislature could take is to increase dispensing fees paid to pharmacists. The Kansas dispensing fee is $3.40 and is paid to a pharmacy for every prescription it fills to cover labor costs. Before adjourning last spring, legislators authorized the Kansas Health Policy Authority to raise dispensing fees in their absence if necessary to counter the effect of the new Medicaid rule.
"The Legislature will be in a much better position when we come back in January to look at it and see to what extent a permanent solution is in the cards," said state Rep. Don Hill, R-Emporia, owner of two pharmacies.
Last week Boyda's staff completed writing a bill that would address the reimbursement gap. Pharmacies would be surveyed to determine what their prescription costs are. The median cost would then be reimbursed 150 percent, Boyda aide Brendan Woodbury said.
"The idea is to figure out what it's costing (pharmacies) and then to pay them back for that cost plus something to cover the expense of keeping a pharmacy open," he said.
Boyda's bill will be introduced this week, Woodbury said.