Pharmacists fear Medicaid changes

McClatchy NewspapersAugust 6, 2007 

WASHINGTON — 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.

"When I talk to other businesspeople and say that, they look at you cross-eyed, like, `No way,'" said Williams, the pharmacist-owner of the Medicine Shoppe in Kansas City, Kan., for the past 18 years. "But it's going to happen."

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.

The legislation is a particular worry in rural states like Kansas, where 36 counties have only one retail pharmacy serving the entire population and seven counties have no retail pharmacies at all.

In the past six years alone, Kansas has experienced a net loss of 22 independent pharmacies. And five of them shut their doors last year, adding to the alarm.

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."

As they face of prospect of declining reimbursements from the government, pharmacists complain that it's already increasingly difficult to make money in the business.

Krien, who considered closing his pharmacy a year ago, said the average net margin for a pharmacy is now 2 percent. A staff pharmacist earns only a third of the average salary of a physician, he said.

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.

While many members of Congress are complaining about the new rule, the irony is that they got the ball rolling.

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.

But small independent pharmacists say they're being asked to sacrifice too much. They estimate that they would absorb 90 percent of the cuts.

"Mr. Bush has not been good to us," said Terry Kepka, pharmacist-owner of Seitz Drug Co. in Ellsworth, Kan., since 1974. He said it's good that Congress is trying to balance its books but that it shouldn't happen "totally on the pharmacists' back."

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.

In response to pharmacists' complaints, a bipartisan coalition of House members, led by freshman Democratic Rep. Nancy Boyda of Kansas, is promising to block the CMS from implementing its new rule on Medicaid reimbursements: “If this rule goes into effect on January 30, hundreds or thousands of communities will lose their local pharmacies forever. We have to stop that."

Boyda argues that the reimbursements should be based on pharmacies' retail acquisition costs.

Concern is also growing in the Senate, where Montana Democrat Max Baucus, the chairman of the powerful Finance Committee, said the new rule "may cut rates too drastically, particularly for small and rural pharmacies." He pledged to monitor the situation to make sure that Medicaid beneficiaries "aren’t left without a way to get the medicines they need."

2007 McClatchy Newspapers

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