New report looks at whether Part D is paying pharmacies enough

January 14, 2008

A new Office of Inspector General report examines how much Medicare Part D is paying pharmacies for products and services.

The Office of Inspector General has issued a report examining the Medicare Part D reimbursement to community pharmacies. It found that Medicare Part D payments, excluding dispensing fees, exceeded pharmacies' drug acquisition cost by about 18%, when wholesaler rebates to pharmacies are included, and 17%, when the rebates are excluded. The estimated difference between Part D payments and drug acquisition costs was $9.13 per prescription including rebates and $8.78 excluding rebates. On the dispensing fee side, though, OIG found that pharmacies are being paid only $2.27 per prescription on average, about $2 less than the average Medicaid dispensing fee.

The report has drawn different reactions from industry. The National Association of Chain Drug Stores asserted that pharmacies are not being overcompensated; in fact, they are being underpaid for all the services they deliver. The Association of Community Pharmacists said an extra 18% does not cover all of pharmacies' overhead costs; they need up to 21% to remain in business. The Pharmaceutical Care Management Association, on the other hand, said, "This report will raise eyebrows among policymakers who have been led to believe that independent pharmacists were in dire straits because of the Medicare drug benefit." It claimed the report undermined pharmacists' case for collective bargaining and prompt pay legislation. The report was conducted by OIG at the request of 33 senators.

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