TOPEKA, KS – At a press conference this morning at Jayhawk Pharmacy in Topeka, Congresswoman Nancy Boyda (Kansas Second District) announced the Save Our Community Pharmacies Act, her bill to prevent the drastic cut in pharmacy reimbursement rates that Medicaid plans to implement next year.

In announcing her legislation, Rep. Boyda said, "In so many rural Kansas towns, community pharmacists are the most accessible, best-trained health care providers for miles. But community pharmacies face growing pressures from mail-order companies and chain drug stores, and now the federal government is making their problems even worse."

In 2005, Congress ordered Medicaid to change its method for reimbursing pharmacies for generic prescription drugs to a formula based on average manufacturer price, or AMP: the price a distributor pays a manufacturer for a medication. In a recent study, the nonpartisan Government Accountability Office determined that AMP-based reimbursement is typically 36% less than a pharmacy's cost to purchase a drug from the distributor. That figure does not account for the pharmacy's overhead or labor costs.

The financial loss threatened under AMP-based pricing would cripple many community pharmacies, potentially triggering a health care crisis in rural Kansas. According to Rep. Boyda, "No business can survive if they're reimbursed only 64 percent of the cost of acquiring their product. That's like forcing a bank to sell dollar bills for 64 cents."

The AMP-based pricing formula was originally scheduled to take effect last month, but in late June, in response to a letter authored by Rep. Boyda and signed by 108 Members of Congress, the Center for Medicare and Medicaid Services (CMS) delayed the reductions until January of 2008. Now, Rep. Boyda has introduced the Save Our Community Pharmacies Act to permanently fix the AMP-based pricing problem.

Rep. Boyda's bill will reimburse pharmacies 150 percent of national median acquisition cost of each generic prescription they dispense to Medicaid beneficiaries, a figure intended to cover both the price of the drug and modest overhead expenses.

Rep. Boyda explained, "It makes no sense to reimburse an end retailer based on a wholesaler's cost. If you want to find out how much a hamburger costs, you don’t ask how much a slaughterhouse pays for a cow. You ask for a receipt for the burger. That's what my legislation does."

Among the major national advocacy organizations endorsing Rep. Boyda's bill are the National Community Pharmacy Association, the National Association of Chain Drug Stores, the Food Marketing Institute, and the National Grocers Association.

At Rep. Boyda's press conference, Melissa Rufenacht, a pharmacy student at the University of Kansas and president of the KU chapter of the National Community Pharmacy Association, spoke of her childhood in Ness County, a rural Kansas county with only one pharmacy. "It's important that (the one pharmacy) stays open. The closest pharmacy is sixty miles away, so the community would suffer immensely. They would have to drive an hour to get their prescriptions. Their doctors may be in Ness City; their pharmacy is in Hays, Kansas, and that's just a lot of trouble, and it's very hurtful to the community."

Michael K. Conlin, R.Ph., a pharmacist and the owner of Jayhawk Pharmacy in Topeka, described how AMP-based pricing would affect his business. "I have to look seriously at the prescription side of the work that we do, and if I'm going to be reimbursed 30% less than what something costs me – all of us got up this morning to at least have the opportunity to make a living, and you can't operate a business doing that." Mr. Conlin added, "The cornerstone of a small community is a grocery is a grocery store, a hardware store, a pharmacy, and a bank, and with reimbursement proposals as they are in Congress, I would venture to say one of those four corners in that community is not going to be there."

Rep. Boyda's legislation will pay for itself by requiring states to increase their utilization of generic drugs, which are significantly cheaper than name-brand alternatives. States that already use generic drugs at high rates will be required to increase their generic utilization by one percentage point per year; states currently lagging behind will be required to increase by three percentage points per year. The savings from better use of generic medications will pay for the fairer reimbursements to pharmacies.