Pharmacy rebels over Medicaid cuts

September 2, 2002

Medicaid reimbursement cuts in Massachusetts and Washington have pharmacies threatening to drop out of the Rx program.

 

COMMUNITY PRACTICE

Pharmacy rebels over Medicaid cuts

Pharmacists in Massachusetts haven't thrown tea in Boston Harbor yet, but their threat to drop out of Massachusetts Medicaid forced state bureaucrats to retreat from huge reimbursement cuts.

With visions of $60 million in Medicaid cost reductions dancing in their heads, Massachusetts legislators cut R.Ph.s' reimbursement from wholesale acquisition cost (WAC) plus 10% and a $3 dispensing fee to WAC minus 2%, plus the $3 fee. Then the scripts hit the fan and pharmacies went into open revolt, declaring that they couldn't fill Rxs at below cost.

The Massachusetts Pharmacists Association fired the first shot when it warned that the draconian Medicaid cuts would force community pharmacies out of the program or into bankruptcy. Then Brooks Pharmacy, CVS, and Walgreens weighed in with threats to stop filling Medicaid scripts. Accounting for 555 of the state's 1,014 pharmacies, the three chains fill about 60% of the Medicaid scripts.

With pullout deadlines looming and Medicaid beneficiaries and advocates screaming, Gov. Jane Swift blinked and delayed implementation of the reimbursement cuts until Oct. 2, when a new rate will be announced. In return, pharmacies agreed to continue to fill Medicaid Rxs. A hearing on the rate is scheduled for Sept. 5. Once the new rate is set, it will apply retro-actively to Aug. 2.

"Ultimately the Medicaid network would have fallen apart, leaving a huge void in coverage," said Carmelo Cinqueonce, executive director, Massachusetts Pharmacists Association. "Fortunately, when push came to shove, the governor was forced to temporarily solve the problem. But we're still not out of the woods because I suspect the rate won't go back to WAC plus 10%," he said.

Walgreens agreed to continue to fill scripts until the Oct. 2 deadline, said a spokeswoman. However, she warned, "If the new rates are below what we can feasibly do business with, we would withdraw from the Massachusetts program."

States are going after pharmacies as an easy target, said John Rector, senior v.p. of government affairs/general counsel, National Community Pharmacists Association. "States are saying that if small business wants to participate in Medicaid, you lose your markup, so what kind of deal is that?" he said. "I think the states are getting a lesson that they need these pharmacies, and it's a long overdue lesson."

Massachusetts is just one of community pharmacy's hotbeds of Medicaid rebellion as states wrestle with huge budget shortfalls and escalating Rx costs. Pharmacists in Washington are walking out of the program that hopes to save about $28 million through a 3% fee cut for brands and a 44% drop for generics. Rod Shafer, who heads the Washington State Pharmacy Association, has warned that up to 20% of the state's pharmacies will be forced out of Medicaid. The state, in turn, vowed to give beneficiaries transportation and signed a mail-service contract with Medco Health.

Chain drugstores have never put up this much resistance to reimbursement cuts, said Crystal Wright, spokeswoman for the National Association of Chain Drug Stores. "What we're seeing in Massachusetts is the worst-case scenario that's the result of the constant erosion of Medicaid reimbursement," she said. "We're very active on the state level, educating legislators that by reducing reimbursement, they could eventually impact access to pharmacy services. An industry running on a 1%-2% profit margin can't keep taking the economic bruising."

There may be more skirmishes on the way as 26 states plan to lower their Medicaid Rx reimbursement rate for fiscal 2003 and 19 states plan to institute or raise Rx co-pays, according to a new survey by the Henry J. Kaiser Family Foundation. The study also found that 48 states rated Rx costs as the top reason for rising Medicaid costs in fiscal 2001, making drugs a runaway cost center.

"The pressure is really on under the Medicaid program," said NCPA's Rector. "The Bush Administration's Pharmacy Plus waivers (see page 30) are going to significantly increase the pressure because there's no new money to expand the program to reach beyond traditional Medicaid eligibles. In Congress, you've got the PBM buddies, such as Billy Tauzin, who's introduced a bill for the bipartisan reform of Medicaid with the stated objective of turning the program over to the PBMs. And the PBMs are slowly but surely putting a lot of pharmacies out of business."

Carol Ukens