Community pharmacies suffer reversals in 2006

July 9, 2007

The number of community pharmacies shrinks for the first time in five years amid smaller profits with even bigger challenges on the horizon.

"Unfortunately community pharmacy is finding itself in rather dire straits since the advent of Medicare Part D," argued Charles Sewell, NCPA's senior VP of government affairs. "We have more business than ever. But because of low and slow reimbursements, we are finding it very difficult to stay in business." After years of growth in the number and profitability of pharmacies, preliminary data from the annual NCPA-Pfizer Digest reveal that in 2006 the number of community pharmacies fell from 24,500 to 23,348-a 5% drop. That was also the first year of the Medicare Part D drug benefit.

The digest numbers also hint at why so many pharmacies closed shop in 2006. According to the study, which will be released in its entirety in September, annual sales of prescription medicines rose 1% while the net operating income for community pharmacies dropped 30%.

In response, NCPA has strongly pushed for prompt pay legislation. The organization is lobbying for the Fair and Speedy Treatment (FAST) of Medicare Prescription Drug Claims Act, which has attracted 159 bipartisan backers in the House of Representatives. Politicians do seem to be listening. "We need immediate action on this," said Rep. Mike McIntyre (D, N.C.). "I know of pharmacies that are teetering on the brink" of closing down.

The Pharmaceutical Care Management Association sharply contests NCPA's assertion that its members are profiting from slow payment. "PCMA member companies have pledged to pay pharmacies submitting clean Part D claims within 30 days," the association offered in a written statement. "The 30-day pharmacy claims timeframe is a standard consistent with physician and hospital claims in Medicare Parts A & B, the Federal Employees Health Benefits Program [FEHBP], and 43 states."

On another front, NCPA has also vowed to fight the Centers for Medicare & Medicaid Services' proposed switch to average manufacturer price for Medicaid generic drug reimbursement. Under the new rule, CMS will begin, on Nov. 30, to use AMP data to determine its federal upper limits for generic pharmacy reimbursement. Two separate government studies of the potential impact of the rule by the Government Accountability Office and the Department of Health & Human Services Office of the Inspector General found that it would lower pharmacy re imbursement well below the acquisition costs of pharmacists.

"Despite a ground swell of Congressional opposition, reputable data outlining the potential threat to pharmacies and the health of Medicaid recipients, and opposition from healthcare groups, CMS has shown callous disregard for any informed dissent and suggested solutions for an AMP definition that does represent actual pharmacy acquisition cost," charged Bruce Roberts, R.Ph., NCPA executive VP/CEO. "NCPA is left with no alternative but to pursue litigation to prevent the government from implementing this flawed policy."