New Medicare report on drug payments spurs new calls for fair reimbursement

ALEXANDRIA, Va. Community pharmacy groups are giving a qualified endorsement to new findings from the Department of Health and Human Services that they say validate the industry’s longstanding concerns over the level of reimbursements for prescriptions dispensed under Medicare Part D.

The findings were released last week in a report from the HHS Office of Inspector General, under the unwieldy title, Review of the Relationship Between Medicare Part D Payments to Local, Community Pharmacies and the Pharmacies’ Drug Acquisition Costs. The OIG conducted its research in response to a request from 33 U.S. senators, according to HHS.

Those lawmakers made that request in response to concerns voiced by community pharmacy interests.

The OIG found that “Medicare Part D reimbursements minus dispensing fees to local, community pharmacies exceeded the pharmacies’ drug acquisition costs by an estimated 18.1 percent when the analysis included rebates that drug wholesalers paid to pharmacies. But the estimated average Medicare Part D dispensing fee paid to those pharmacies “was $2.27 per prescription, about $2 less than the average Medicaid dispensing fee,” the report noted.

“Excluding rebates, Part D payments exceeded drug acquisition costs by an estimated 17.3 percent,” added the OIG. “The estimated difference between Part D payments and drug acquisition costs was $9.13 per prescription including rebates and $8.78 excluding rebates.”

Responding to the report, neither the National Association of Chain Drug Stores nor the Association of Community Pharmacists disputed those numbers. But both groups contend the findings validate what they have been saying all along: that the fees and reimbursements paid to pharmacies for dispensing medicines to Medicare patients aren’t enough to make up for what pharmacies spend to acquire and dispense the drugs.

“We need to remember what the OIG report is and what it is not,” said NACDS president and chief executive officer Steve Anderson.

“This report underscores the need to ensure reimbursement is fair when both drug costs and costs of dispensing are considered, and to provide incentives for the utilization of generic drugs,” he went on. “It is not a comprehensive analysis of all costs associated with the drugs and services that pharmacies deliver to patients, as it focuses on only one side of the equation.

“While the OIG report compares drug acquisition costs and payments to pharmacies, it is essential to remember there are two components to actual pharmacy cost: the cost of the drug, and the cost to dispense the drug,” Anderson continued. “OIG makes this important point in the report, saying ‘The dispensing cost information clarifies that our analysis did not account for all of the costs associated with dispensing prescription drugs.’”

Anderson cited a recent study conducted by the accounting firm Grant Thornton, which found that a retail pharmacy’s average cost in payroll, overhead and other operating costs to dispense a prescription drug is $10.50—to say nothing of the acquisition costs of the drug itself.

“Considering drug costs in a vacuum is potentially misleading and counterproductive to health understanding and advancement,” NACDS’ top officer concluded. “Let it be stated clearly: pharmacies are not overcompensated for the prescription drugs and services they provide to Medicare beneficiaries, and in fact the cost of dispensing is not adequately reimbursed.”

Also reacting cautiously to the government’s findings was the Association of Community Pharmacists. Like its colleagues at NACDS and the National Community Pharmacists Association, ACP argues that the level of reimbursement and dispensing fees for Part D prescriptions falls below what pharmacies have to pay to buy and dispense the drug.

Nevertheless, noted the organization in a statement, “The momentum on pharmacy issues in Washington has shifted. Congress found several ways to undermine independent pharmacies in previous years—such as with provisions in Medicare Part D and new AMP rules—but began to listen to hometown pharmacy concerns [in 2007].”

ACP’s legislative agenda for 2008 includes a determined lobbying campaign on behalf of legislation to level the playing field between independents and big chain pharmacies through passage of House Bill 971. The bill, which failed to pass last year, would eliminate the anti-trust barriers that prevent small and independent pharmacies from negotiating collectively with pharmacy benefit managers.

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