Drugstore chains threaten to drop Medicaid patients

SEATTLE – Drugstores around the nation are threatening to stop serving Medicaid patients, close or reduce hours if cash-strapped states follow through on plans to cut the amounts paid to pharmacies for filling Medicaid prescriptions.

Squeezed by the recession, more than a dozen states are considering reducing reimbursement rates under Medicaid, the joint federal-state program that provides health care to 36 million poor people.

“This will send a number of pharmacies over the edge,” says Ernest Boyd, executive director of the Pharmacists Association in Ohio. “We’re not a religion. We’re not here for charity purposes. We’ve got to make a profit or we can’t stay open.”

When pharmacists fill prescriptions for Medicaid patients, states pay them the cost of the drug plus a flat fee. But health care spending is soaring at a time when the recession is forcing states to cut their budgets. Medicaid consumes 20 percent of the average state budget.

Washington Gov. Gary Locke has proposed the most drastic cut so far, a $71 million reduction to the $360.8 million budgeted for the current two-year fiscal cycle.

Other states that have made or are considering cuts include Arkansas, Colorado, Connecticut, Idaho, Illinois, Indiana, Maryland, Mississippi, Montana, Nebraska, North Carolina, Ohio, Oklahoma, South Carolina and Virginia.

The inspector general for the Health and Human Services Department nudged states toward the idea with an August report warning that they are overestimating wholesale drug prices and overpaying pharmacists by more than $1 billion a year. The report recommended cutting pharmacy payments by about 10 percent. Pharmacy groups attacked the study as flawed.

Representatives of CVS and Walgreens, the nation’s largest drugstore chains with a combined 7,700 stores, say they may reduce hours, close stores and stop expansion in states that deeply cut Medicaid pharmacy payments. Rite Aid and Albertsons say they may drop Medicaid completely in those states – something pharmacies can legally do.

“We’re going to have to re-evaluate our participation in Medicaid,” says Karen Rugen, a spokeswoman for Rite Aid, with 3,600 stores in 29 states. “We believe everyone should have access to medical care. It’s just hard to do it below your costs.”

Independent drugstore owners are even more alarmed.

State health administrators such as Washington state Medicaid director Doug Porter say they do not believe cuts will devastate pharmacists.

“We’re definitely going to be paying their margins to the bone, but at least in theory we should not be putting them below cost,” Porter says. “I would be shocked to see any serious number of pharmacies not participating.”

State officials say pharmacies should instead drive harder bargains with health plans, wholesalers and manufacturers.

Still, pharmacists and patients worry.

Seattle Medicaid recipient Dave Gallaher has relied on independent pharmacist Tom Engel ever since the former Boeing employee was diagnosed with degenerative arthritis of the spine. Gallaher says the prospect of finding a new pharmacist scares him.

“I trust him totally,” Gallaher says. “When you’re talking about prescription drugs, you’re talking about life and death.”

But Engel says that if the state cuts pharmacy reimbursements, he might stop taking Medicaid patients like Gallaher.

“Why do it if you don’t get paid for it?” Engel asks.

Engel, for example, pays his wholesaler $109.76 for a month’s supply of Prilosec, commonly prescribed for stomach problems. The state pays him $127.35; Washington Medicaid patients pay nothing. The governor’s proposed reimbursement cuts would drop Engel’s reimbursement to about $111.

A private insurer would reimburse Engel $123.61 for the same dose of Prilosec. That is less than the state currently pays, but pharmacists say Medicaid should pay more because Medicaid patients demand more time and effort. They tend to be sicker than the general population, and many do not have a primary care doctor and so they rely heavily on pharmacists’ advice.

Also, Medicaid requires pharmacists to jump through more bureaucratic hoops. For instance, before Engel fills that Prilosec prescription, he must call the doctor to find out why it was prescribed.

Finally, they say, Medicaid takes longer to pay than private insurers do, and refuses more often to pay.