Viewpoint: Can independents survive Part D?

November 20, 2006

Decades ago, when there were no pharmacy benefit managers and pharmacists were fondly called Doc and sold only medication, pharmacists were respected for the tireless care they gave patients. Over the past 20 years, PBMs working for insurance companies and government agencies have gradually disconnected the care from health, treating pharmacy like a commodity business. Because of PBMs' steady ratcheting down of reimbursements, pharmacists now barely make 1% to 2% profit margins on dispensing prescriptions for private and government plans.

Like physicians, pharmacists are healthcare professionals and should be compensated for their years of professional training and counseling. A pharmacist is available 24 hours a day, seven days a week, with no need for an appointment. In fact, it is not unusual for an independent pharmacist to open his or her pharmacy at 2:00 A.M. to dispense a prescription for a sick patient.

Based on a 2005 University of Texas study, the average cost of dispensing an Rx in a community pharmacy is $9.62. So, every time a pharmacist dispenses a Medicare prescription, he is losing money. For a pharmacy to collect enough revenue to stay in business, the reimbursement rate must cover the cost of the drug, the cost of dispensing the Rx, and the cost of professional services.

Making matters worse, since January, PBMs have delayed payments to pharmacies beyond 30 days. To keep their pharmacies open and enable their patients to have continued access to their medications, many R.Ph.s have secured large loans to mitigate this cash flow problem.

With many independents struggling to survive, there is a high probability that patients may soon see their neighborhood pharmacy disappear. While creating the Medicare drug benefit was a good thing, Congress must enact legislation that forces PBMs to reimburse pharmacists promptly and at a fair market rate for their services.

PBMs don't deal with patients, pharmacists do. So why are the nation's top PBMs reporting record profits from managing Medicare Rx plans, while R.Ph.s struggle to survive? It seems that the business of health has superseded the care for health. Pharmacists care too much about patients to abandon them, even as they face dire financial problems under Part D, but their fortitude may not be enough to keep the pharmacy lights on.

THE AUTHOR is VP of Governmental Affairs for the Association of Community Pharmacists Congressional Network.