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Retail Rx can’t afford to let its guard down

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Retail pharmacy operators garnered a significant victory late last month when the state of Delaware agreed to rescind some of the cuts it had intended to make in reimbursements for prescriptions filled under the Medicaid program.

The final act in the long-running drama, which started on April 1 when the state department of health and social services announced lower Medicaid payments for branded medications, came with an agreement between Delaware officials and the National Association of Chain Drug Stores and the National Community Pharmacists Association (NCPA).

The deal, which ended a lawsuit filed by the groups, calls for the state to reimburse pharmacies for the average wholesale price (AWP) of a branded drug minus 14.5%, a rate 1.5% higher than the one originally mandated. In addition, pharmacies obtained the right to seek increased payment for generic drugs if lower reimbursements for such products fall below actual acquisition costs.

The actions of Walgreen Co., the biggest pharmacy provider in Delaware, played a critical role in bringing about the compromise. The drug chain, which operates 66 stores in the state, announced in June that it would stop serving Medicaid patients there.

“Quite simply, we can’t continue to participate in a program that, in some cases, pays us less than our cost to fill these prescriptions,” Kermit Crawford, Walgreens’ senior vice president of pharmacy, said at the time. “By making it uneconomical for pharmacies to continue filling Medicaid prescriptions, the state’s new payments to pharmacies hurt the very patients that Medicaid is meant to serve.”

For retailers, the issue ultimately comes down to the ability to maintain a viable economic model. Pharmacy operators in Delaware indicated that, under the state’s initial plan, more than 80% of Medicaid scripts would have become unprofitable to fill. The changes in the program would clearly have made it untenable for pharmacies to continue to do business as usual and, as Crawford noted, would have curtailed vital health care services for Medicaid beneficiaries.

The principled stand taken by NACDS, NCPA and Walgreens averted, for a time at least, a destructive scenario from unfolding in Delaware. It surely won’t be the last instance when such measures are needed. State budgets across the country are in a dire condition, and Medicaid is one program that will be scrutinized as a source of potential cost savings.

Community pharmacy will be called on again, probably many times, to defend its ability to serve the most vulnerable patients.

And that’s just one of the fronts on which the industry has to keep watch. President Obama was scheduled to speak to a joint session of Congress shortly after presstime in an effort to reenergize the move toward health care reform. That legislation has the potential to affect retail pharmacy in profound ways: The right provisions could open the way for members of the profession to receive additional compensation for the services they provide; the wrong ones could institute reimbursement mechanisms that do more damage than the one that was first envisioned in Delaware.

There’s more trouble on the horizon. After an appeals court upheld an earlier ruling, legal settlements with First DataBank and Medi-Span that cut the average wholesale price (AWP) of medications will take effect at the end of the month, triggering reductions in reimbursements to pharmacies.

In the current environment, where both the need for expanded pharmacy service and the forces working against adequate payment for it have never been greater, constant vigilance in Washington, the state capitols and the courts is mandatory for members of the profession.


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