Medicare Part D leaving independents stranded

October 23, 2006

Closing the only pharmacy in Holly Ridge, a small town in eastern North Carolina, was not an easy decision for Randy Spainhour. The 58-year-old pharmacist knew that the closest pharmacy was 15 miles away and that it would put a big strain on many of his customers. "I felt I had no choice," he insisted. "It was either that or going bankrupt."

In case there was any doubt as to why Spainhour was closing the pharmacy, he attached a short note to the pharmacy permit he returned to the North Carolina Board of Pharmacy: "Due to low reimbursement of Medicare Part D," he wrote, "and especially the slow and no payment by the insurance companies, I have been forced to close my pharmacy."

Spainhour is not alone in making that decision. In Wyoming, eight of the state's 140 pharmacies have closed this year-six since May. "So far we've been lucky," explained James Carder, executive director of the Wyoming State Board of Pharmacy. "There have been other pharmacies in the towns for people to switch to. We have a number of towns with only one pharmacy, and if they close, it will have a big impact. The next town is quite a ways off."

Medicare Part D, of course, is not the only factor causing pharmacies to close. According to Patricia Hill, executive VP of the North Dakota Pharmacists Association, seven pharmacies have closed in that state this year, but Medicare Part D had nothing to do with it. Instead, she insisted that lower reimbursement rates from Blue Cross Blue Shield of North Dakota are responsible for the drop. "We will see another 12 to 18 pharmacies close," she warned.

Concern over slow pay

Despite the experiences in Wyoming and North Carolina, there has been no systematic study of the impact of Medicare Part D nationwide. However, it is clear that many community pharmacists are feeling squeezed by the program. According to a recent survey from the National Community Pharmacists Association, 89% of pharmacists said that their overall cash flow was worse now than before the Part D program started and 33% said they had considered closing their pharmacy as a result.

Slow payment remains the principal concern for most pharmacists. Half of the pharmacists surveyed said it now takes three to four weeks to be reimbursed for prescriptions dispensed, and another 40% said it takes five to six weeks to be paid. Pharmacists typically must pay their suppliers every 15 days.

While admitting to some initial problems, officials from the Centers for Medicare & Medicaid Services insisted that they are concerned about the plight of independent pharmacists and are making every effort to investigate instances of slow payment. "Resolving specific pharmacy complaints is a top priority," CMS deputy administrator Leslie Norwalk told the House Subcommittee on Health in May. Larry Kocot, special adviser to CMS administrator Mark McClellan, echoed those sentiments, noting that plans that have many complaints from pharmacies may not have their contracts renewed in 2007.