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The Oklahoman

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Hurt Feared from Medicaid Shift

By Jim Stafford

June 5, 2008

Almost 4,000 Oklahoma jobs and the future of up to 22 percent of the retail pharmacies are at stake because of the Deficit Reduction Act of 2005, according to an economic impact study that was treleased this week.

Reimbursements fall short of costs

The study was released by the National Association of Chain Drug Stores and the Food Marketing Institute.

The Centers for Medicare and Medicaid Services proposed reducing the reimbursement for prescription generic drugs by up to 36 percent, far below their actual cost to state pharmacies, said Phil Woodward, executive director of the Oklahoma Pharmacists Association.

For example, Woodward said, the reimbursement for a generic drug that costs pharmacies $10 would be reduced to $6.40. That translates to a loss of $3.60 on each prescription drug dispensed.

"We are really concerned about our rural pharmacies because they are in a position where they are doing a lot of Medicaid and third party (prescriptions),” Woodward said. "Ninety-five percent of their business is third-party pay, and they may be doing 30 to 35 percent Medicaid program.

"So you see the impact that would have.”

A spokesman for the agency said the study is based on old numbers and that pharmacists overstate the true cost of generic drugs they dispense.

"The fact is we need to restore accountability and fiscal integrity to the Medicaid program so that we can deliver quality health care to our beneficiaries,” said Jeff Nelligan, director of media affairs for CMS. "It is simply not right nor sustainable that a taxpayer-funded program should continue to overpay for these drugs, based on commercial compendia data that everyone knows greatly overstates the true costs of these drugs.”

In addition, Nelligan said, Medicaid payments make up only 9.1 percent of national drug spending. CMS is proposing a 5.6 percent reduction in drug spending, he said.

"A 5.6 percent reduction in this 9.1 percent of pharmacy revenues would be a 0.5 percent overall reduction in pharmacy revenue,” Nelligan said. "It's puzzling to think that such a tiny reduction translates into 22 percent of Oklahoma pharmacies going out of business.”

However, Woodward said a larger share of the spending reduction outlined by Nelligan would come out of pharmacists' reimbursements.

What's the alternative?

Implementation of the federal Deficit Reduction Act has been delayed by lawsuits, Woodward said.

In the meantime, state pharmacists and the Oklahoma Health Care Authority, which administers the Medicaid program in Oklahoma, engineered a plan that would increase the drug "dispensing fee” paid by the state and the Medicaid program to $9 from $4.15 for each prescription. The plan would go into effect only if the Deficit Reduction Act is implemented, Woodward said.

However, some have asked: Wouldn't that plan negate much of the savings from prescription drug cost to the federal government?

"It will probably negate a portion of it,” said Nancy Nesser, pharmacy director for the state health care authority. "We don't think it will completely wipe it out.”

However, the higher dispensing rate would shield the state from much of the economic costs outlined by the study, she said.

"They certainly didn't take into account our contingency plan,” Nesser said. "So it (the report) is certainly going to be overstated, but I can't say by how much.”

Other tactics that pharmacists might employ to negate the effects of the deficit act would be to ask doctors to prescribe brand-name drugs, for which the reimbursement rate is higher. That will create a "Catch 22” situation where the higher costs shift back to the federal government, Woodward said.

"The simple story is that we are trying to incentivize these generics, yet CMS is going to disincentivize them because they are going to pay us less,” Woodward said.

Dispensing of brand name drugs requires prior authorization by the Medicaid program before they can be reimbursed, Nesser said.

What's to come?

Finally, pharmacists are hoping that legislation before Congress can halt implementation of the reimbursement reduction. A bill called the Save Our Pharmacies Act is under consideration in the House, with similar legislation introduced in the Senate.

Reps. Dan Boren, D-Seminole, and Frank Lucas, R-Cheyenne, are listed as co-sponsors of the legislation in the House.

"Representing a primarily rural district, I am aware of how much my constituents rely on small, local community pharmacies more than most,” Lucas said.

"Action that threatens the long-term viability of these businesses ultimately threatens the access of my constituents to the prescription medication that they need.”

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