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Changes to Reimbursement Rates For Medicaid

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The government has come up with a new way of determining the cost of drugs when reimbursing generic drugs to pharmacies in the Medicaid program. The government will take the lowest average manufacturer pricing (AMP) in a drug class and multiply that by 250 percent.

Medicaid is a program designed to assist those with lower incomes. Primarily it helps children, single mothers, pregnant women, and at one time, senior citizens.

Max Heidrick, owner of S and S Drugs in Beloit, Kansas, says his prices for purchasing drugs are different than that of V.A. Hospitals and mail order companies. Companies like that are able to buy their drugs in bulk and are therefore able to cut out the middleman and get a better price. Heidrick is not.

The new legislation will set the allowed cost of the drug 36 percent below what independent pharmacies are able to purchase it for. The equation could play out like this: A medication costs your pharmacy $20.00. The new Medicaid guidelines allow a cost of only 64 percent of the drug or $12.80. The pharmacy is paid the allowed cost of the drug plus a dispensing fee of $3.00. This would result in a total payment to the pharmacy of $15.80. This is $4.20 less to the pharmacy than the cost of the drug.

A recent survey in the pharmacy industry reveals the cost of a pharmacy to dispense a prescription is $10.50. The pharmacy has a cost of the drug at $20.00 and the cost of dispensing at $10.50 for a total of $30.50. This adds up to a loss of $14.70 for that particular drug.

Heidrick says this will force him to look at his Medicaid contract more thoroughly. Ultimately, if it means he is going to lose money, then he will not renew it. “We can’t continue to lose money,” said Heidrick.

The Medicaid proposal follows the advent of Medicare Part D, and would be the second program in two years that had a significant financial impact on rural pharmacies. Medicare Part D was the reason cited for the closing of another Beloit Pharmacy. Heidrick says most of the Medicare eligible people that also qualify for Medicaid are now covered under Medicare Part D, so the number of Medicaid patients in Mitchell County has decreased. “Medicare Part D is a great program for Medicare eligible patients,” said Heidrick.

Currently, the Center for Medicare Services (CMS) has not announced what the reimbursement fees of generic medicine will be. As a result, many pharmacy owners are hesitating to enter into new contracts. If pharmacies like S and S Drug are forced to close or forced to no longer accept Medicaid, the impact on people could be great.

Customers will be forced to find other ways to get their much-needed prescriptions filled. This may mean being having to drive to other towns, or in the case of Mitchell County, to other counties. Parents would be forced to drive several miles to get the medicine they may need right away for their children. The only other option individuals will have is to go without.

Currently there are 36 counties in Kansas that have only one retail pharmacist. Seven counties have none at all. Last year five pharmacies were forced to shut their doors. This brought the number to 22 pharmacies closing in the state of Kansas according to the Kansas Pharmacist Association. Many of these pharmacies were in rural areas.

Heidrick says he has always accepted all Medicare Part D plans, but after two years experience and data, it is evident that while the majority of the plans offer a fair and equitable reimbursement, there are certain plans that are not profitable or fair to the pharmacy. In order for it to be so, there would need to be an increase in reimbursement.

Unless there is an increase, Heidrick says he will not accept them in the new contract year starting in January 2008. His requests with the insurance companies have fallen on deaf ears. “There are many plans available; people need to choose one that works for then and the pharmacy they choose.”

He notes that the larger retail chains do not rely on their pharmacies for income. In most cases they are a loss leader to get customers into the stores to purchase non-pharmacy items. “That is not the case in small rural pharmacies. The pharmacy has to be profitable for the business to exist,” said Heidrick.

CMS has said the reimbursement fee should be announced by the end of spring. This would mean pharmacies should know no later than June 20. The problem with that date is that the current legislative session will have ended and will not allow for the federal government to change any decisions. It would force pharmacies to deal with the cut in reimbursement rates until the next session.

Rep. Jerry Moran (R-KS) is involved with a letter campaign to CMS. It is part of an effort to stop this new mandate or possibly get them to table the idea until more information can be gathered and figures are put together that pharmacists can work with.

Senator Pat Roberts is working to get the same things accomplished through a letter on the senate side. In a press release on March 17, Senator Roberts said, “American families rely on their pharmacists, and this short-sighted proposal will create significant economic hardships for our local pharmacies, which ultimately threatens patient access to their needed drugs.”

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  • Another reason to institute SOCIALIZED MEDICINE in the United States. The government is playing off the small pharmacies against the Walgreens and Snyders of the country to kill them off…

    Another rabbit punch to poor and lower middle income people…