R.Ph.s told it's up to them to set their service fees

April 17, 2006

Some pharmacies will not survive the next 12 months. The longer pharmacy waits to break longstanding links between pharmacy product and pharmacy reimbursement, the bleaker the prospects.

"The reality is that reimbursements are declining," Lawrence Kocot, senior adviser to the administrator at the Centers for Medicare & Medicaid Services, told the National Council of State Pharmacy Association Executives. NCSPAE was meeting at the American Pharmacists Association's annual conference in San Francisco. "The more fundamental reality is that payment that continues to be tied to product is a threat [to pharmacy]. Third parties are looking at product costs. Service is what we have to focus on now, and it is up to pharmacy to get that value proposition across to the people who make the decisions."

Where CMS leads, Kocot reminded state association executives, private payers usually follow. "It is up to pharmacy and pharmacists to protect their own financial interests," he said. "There has to be a point where you reject the contract that is offered."

When it comes to generics, warned Stephen Schondelmeyer, director of the PRIME Institute at the University of Minnesota College of Pharmacy, reimbursement will be about 5% below cost. "Lawmakers have been duped into thinking that AMP represents pharmacy's product cost," he told association leaders. "But it ignores wholesalers and assumes that rebates flow to pharmacy. Starting Jan. 1, we will lose money on every generic dispensed under Medicaid, and generics are half of all Medicaid scripts. We will see pharmacies closing."

CMS recognizes pharmacy's problem, Kocot said, but the agency is limited to implementing changes mandated by lawmakers. Any change to separate product reimbursement from payment for professional services will have to come from pharmacy itself.

It's not an impossible task, said APhA president Eugene Lutz. Pharmacy is riding high as the profession that saved Medicare from total disaster in January.

The problem, Kocot noted, is that while pharmacy knows what a tremendous impact pharmacists can have on improving patient care and managing costs, no one else knows. Most payers recognize the importance of improving generic utilization rates, for example, but they don't recognize that R.Ph.s are key drivers in generic use. "The problem is that pharmacists are talking only to pharmacists," he said. Pharmacists publish in pharmacy journals, he explained, but payers and policy makers don't read pharmacy journals.