State and federal programs to contain health care costs in Maine have produced at least one significant side effect: the failure of small, independent pharmacies in towns such as Stonington and Lubec.

The Maine Merchants Association is underscoring that loss in Augusta on Friday, naming two of the state’s largest independent pharmacy Retailers of the Year. Bill Miller, owner of Miller Drug in Bangor, said the recognition is, at best, a conflicted honor.

“I feel at times by going to Augusta to receive this award, it’s my obituary,” said the 70-year-old pharmacist, whose parents founded the store in 1939.

Miller Drug and the other award recipient, Waltz Pharmacy in Camden, are the largest among Maine’s 58 independent pharmacies. Waltz is an eight-store chain spread from Damariscotta to Belfast. Miller is a single-store operation that averages more than 1,200 prescriptions filled each day. Each business employs about 100 people.

Pharmacies large and small in Maine are reeling from cuts in government drug reimbursement, competition from Canadian imports, and an estimated $90 million to $100 million in MaineCare prescription business being redirected to an out-of-state, mail-order provider.

Chain stores and larger independents like Miller and Waltz have been able to increase their volume to compensate for the lost income. But the new MaineCare program was the last straw for smaller pharmacies that since have failed in Caribou, Oakland, Lubec, Stonington and Machias in the past year.

James McGregor, executive vice president of the MMA, said those failures proved that pharmacists concerned by the state’s budget-balancing strategies were not just “crying wolf.”

“It seems like it’s a new issue a day that is affecting pharmacy, and you just have to admire a Billy Miller or a Waltz Pharmacy that hangs in there and keeps providing good service in the midst of all this chaos,” McGregor said.

The chaos, like the need to control rising health care costs, isn’t new. In 1992, Rite Aid Corp. won a Superior Court suit against the state of Maine, blocking efforts to require state employees to purchase chronic care drugs from an out-of-state, mail-order provider. The state at that time also cut the percentage pharmacies were reimbursed per prescription for state employees, paying instead a flat-rate dispensing fee. The move coaxed pharmacies into collective purchasing arrangements to drive down their wholesale cost of drugs.

A mail-order piece the MaineCare legislation adopted last session applied a similar strategy to the chronic care prescriptions of the state’s 240,000 MaineCare patients. The plan projected $3.4 million in savings, and pledged patients would have a choice of mail pharmacy providers.

The plan has fallen short. The Department of Health and Human Services pursued relationships with as many as nine providers, but only the Texas-based pharmacy of Wal-Mart Stores Inc. has signed on to the plan so far. In an Oct. 21 report to legislators, DHHS Commissioner John Nicholas said the mail-order program so far this year had filled 5,800 prescriptions at a loss of more than $700,000.

“The savings we hoped to generate through mail order are not as significant as we had hoped,” said department spokesman Newell Augur, adding that expectations for total savings have been lowered from $5 million to $1 million per year.

Legislators are attempting to aid rural pharmacies by making available $1 million per year in direct payments to support rural pharmacies. In order to be eligible for such provider incentive payments, a pharmacy cannot be within metropolitan statistical areas, must be at least 10 miles from another pharmacy and must participate in Maine’s Drugs for Elderly and Maine RX programs. The payments will be available to chains as well as independent drug retailers.

Augur said the department expects the program to get under way and quarterly payments to qualified pharmacies to begin no later than the beginning of November. Store owners are taking a wait-and-see position on the incentives, McGregor said. Bill Miller’s store would not be eligible under the rules. For his part, Miller said he already has jotted down a few words to say Friday to an audience scheduled to include Gov. John Baldacci, the driving force behind the cost cuts.

“I’ll try to be polite when I receive the award,” Miller said. “I just hope it’s not my epitaph.”