By Jim McLean
KHI News Service
Pharmacist Brian Caswell, left, talks with customer Paul Lyons of Oswego at Wolker Drug in Baxter Springs. (Andrew D. Brosig/KHI)
TOPEKA, June 25
Kansas retail pharmacists have been given a temporary reprieve from a new Medicaid reimbursement rule that they say could cripple them financially.
The federal Centers for Medicare and Medicaid Services announced last week that it would delay enforcement of the rule until the end of the year. Enforcement had been scheduled to begin next month.
Kansas Congresswoman Nancy Boyda said she believes a
May 18 letter
sent to CMS Acting Administrator Leslie Norwalk by 109 members of the House of Representatives
including all four from Kansas
helped force the delay.
“I don”t want to be overly dramatic but if we had not gotten this, we would have lost some retail pharmacists especially in rural areas,” said Boyda, a 2nd District Democrat.
Live concern
That could still happen.
Though enforcement has been delayed, CMS officials remain committed to the new formula, which they estimate will save the federal and state governments $8.4 billion over five years. Medicaid, which provides health services to low-income individuals, is administered by state governments but the federal government pays approximately 60 percent of the program”s costs.
“We believe these changes will help capture the most accurate pricing data possible to assure that the federal government and state Medicaid programs are paying appropriately for generic drugs,” CMS administrator Norwalk said in
a recent letter
to Health and Human Services Inspector General Daniel Levinson. “We believe that this drug pricing transparency will lead to more equitable and appropriate reimbursement for prescription drugs as states will be more aware about the true market price for prescription drugs.”
Norwalk wrote the letter in response to a report by Levinson”s office that said pharmacists would lose money on many generic drugs under the new formula.
Also, a
2006 report by the Government Accountability Office said pharmacists would be paid an average of 36 percent below their costs under the new rule.
“In short, the proposed rule would force retail pharmacies out of the Medicaid business,” the members of Congress said in their letter to CMS. “In many underserved areas, losing Medicaid business would mean these critical community pharmacies would go out of business altogether.”
That is not an idle threat, according to Brian Caswell, president of Wolkar Drug in Baxter Springs, who called the new formula “the biggest threat to pharmacies that we”ve ever seen. It is going to be the death knell for many rural pharmacies.”
Brian Caswell, left, and his assistant Teri Sneed fill prescriptions for customers at Wolkar Drug in Baxter Springs. (Andrew D. Brosig/KHI)
Mike Conlin, owner of the Jayhawk Pharmacy in Topeka, agreed that the rule poses the biggest threat to small-town pharmacies that don”t have the kind of diversified product lines that bigger chain and discount stores often do. But he said even he would be forced to decide whether he could continue to serve his Medicaid clients, which include disabled individuals who need their prescriptions delivered to their group homes and their pills individually packaged.
“There is a whole series of services that we offer those individuals that we don”t get reimbursed for as it is,” Conlin said.
Overpayments
The change in the reimbursement formula was written into the Deficit Reduction Act of 2005. It requires that reimbursements for more than 500 generic drugs be based on the “Average Manufacturer Price” rather than the current practice of basing them on the “Average Wholesale Price.” Congress ordered the change after an HHS report said that payments under the old system “often greatly exceeded prices available in the marketplace.”
Brendan Woodbury, a legislative assistant to Boyda, said under the old formula wholesalers inflated their prices but made it up to pharmacists through rebate programs that the government supported through higher reimbursements.
Caswell said he favors government efforts to control Medicaid drug costs, which totaled $41 billion nationally in 2005 and currently run about $254 million a year in Kansas. But he said his small business can”t afford to lose money on the Medicaid prescriptions it fills.
“Unless the state can bump up the dispensing fee to cover the gap there is no way we”re going to be able to continue to participate in the program,” Caswell said. “That”s it in a nutshell.”
Caswell estimated that about 40 percent of his clients are covered by Medicaid.
As a past president of the Kansas Pharmacy Association, Caswell has been involved in discussions with the Kansas Health Policy Authority that resulted in the Legislature passing a proviso requiring the authority to produce a Kansas-specific estimate of new formula”s cost to pharmacies and, if necessary, to raise dispensing fees.
Currently, pharmacists here are paid $3.40 for every prescription they fill to cover their labor costs. Nationally, the average dispensing fee is $4.50, according to a Kaiser Family Foundation report. The report said that Texas officials have approved a plan to raise the fee to at least $7.50, with triggers that could increase it to $12.50.
Andy Allison, deputy director of KHPA, said the agency is still collecting information from pharmacists about the cost of drugs.
“Once we have all that we”ll reassess our dispensing fee,” he said.
Federal “fix” in the works
Boyda said neither the old system nor the new formula is workable. So she is using the six-month delay in the enforcement of the DRA rule to work for passage of an alternative formula, one that would base reimbursements on the actual costs that pharmacists pay for generic drugs. She said invoices would be reviewed to determine those costs.
Boyda said her goal is to ensure that retail pharmacists are fairly compensated. She said the DRA formula singles pharmacists out in a way that is unfair.
“It”s like saying, “we”re going to balance the budget on the backs of retail pharmacists,” she said.
In addition to basing reimbursement payments on the median price that pharmacists pay for drugs, Boyda”s proposed legislation would standardize dispensing fees to cover actual labor costs, Woodbury said.
Because Boyda”s bill would cost the federal government more than the DRA formula, Woodbury said money would have to be found to offset those costs to comply with budget rules adopted by the House.
He said a draft of the bill should be ready within the next few weeks.
-Jim McLean is a staff writer for KHI News Service, which specializes in coverage of health issues facing Kansans. He can be reached at
jmclean@khi.org
or at 785-233-5443, ext. 110.