Community pharmacists claim that Medicare reimbursement rates are forcing community pharmacies throughout the country to shut down.
Community and independent pharmacists say the new Medicare prescription-drug benefit, known as Part D, has given pharmacy benefit managers leverage with insurance companies to set low reimbursement rates to pharmacies. As a result, beleaguered pharmacies are struggling to survive.
“You’re going to see considerably more pharmacies close in 2007. They cannot continue in this vein,” said Mike James, pharmacy owner and director of government affairs for the Association of Community Pharmacists.
The Association of Community Pharmacists estimates that the drug benefit’s payment structure was responsible for more than 1,000 closures of independent pharmacies nationwide last year.
Maryland and Virginia pharmacy officials do not have specific data on the number of independent-pharmacy closures but said several rural pharmacies either sold out to larger retail stores or closed as a result of the new Medicare drug benefit.
A new study conducted by the Coalition for Community Pharmacy Action found that the average cost to a pharmacy for dispensing a drug is $12.10. Mr. James said that most pharmacies are being reimbursed by insurance companies about $1.50 for Part D drugs.
Pharmacy benefit managers (PBMs) administer Medicare drug-benefit plans for employers and health insurers.
Crystal Wright, a spokeswoman for the Association of Community Pharmacists, said independent pharmacies have little choice but to go along with PBM’s reimbursement rates.
“It is a take it or leave it deal. The pharmacies sign those contracts because they have no negotiating power or leverage,” she said. “If a pharmacy tells a big Part D provider the rates won’t work for them, the PBM will drop the pharmacy from private-sector plans. Therefore the pharmacy would lose not only Medicare clients but also a lot of private business.”
But Susan Hayes, principal of Pharmacy Outcomes Specialists, said community pharmacies are not closing because of PBM’s reimbursement rates rather they are closing due to the added burden Part D has placed on them.
“Medicare Part D has given them a lot of frustration, and many are selling out to larger retail pharmacies chains that can handle the new workload,” she said. “But their Medicare reimbursement rates are the same, if not better, under PBMs.”
Rob Bizzell is an independent pharmacist in North Carolina who has not had to close any of his 12 pharmacies, but he estimates that since the inception of Part D his business has lost 3 percent of its which comes out to about $2 million.
“I’m losing money on every Medicare prescription I fill,” he said. “Rural community pharmacies are in jeopardy.”
In Ohio, Ernest Boyd, executive director of the Ohio Pharmacists Association, said “a number” of independent pharmacies closed last year. “It’s hard to know exactly how many, but I have spoken to a lot of pharmacists who point to Part D as the reason they had to close,” he said.
More trouble could be on the horizon. Congress passed legislation in 2005 that intends to ratchet down Medicaid payments for generic-drug payments to pharmacies by $8.4 million over the next five years. Enforcement has been postponed for further review.
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