States face myriad financial issues in fight to seek balance

Drug Store News,  August 18, 2003  

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States are grappling with the funding shortfalls and growth in health care and prescription costs with a wide range of responses, many damaging to community pharmacy For instance:

* Arkansas, citing rising drug costs, new services and job losses that push more people into Medicaid, predicts its Medicaid expenses will jump to more than $3 billion within two years.

* After a 44 percent jump in state spending between 1998 and 2002, California's budget deficit of more than $38 billion has left the Golden State on the brink of bankruptcy, reduced its debt to junk-bond status and helped trigger a recall election bid against Gov. Gray Davis. Davis has sought $7.6 billion in state health care cuts that would reduce pharmacy payments by more than $100 million through dispensing tee cuts, a lowered reimbursement model and other means.

* In Delaware, retail pharmacies led by Happy Harry's won a rare victory early this year when the state backed off a plan to slash Medicaid prescription reimbursements to average wholesale price minus 16.4 percent, plus a dispensing fee of $3.65. But the Department of Health and Social Services has proposed increases in copays as the state continues to grapple with budgetary distress.

* Facing a reported Medicaid binding shortfall of $450 million, Kentucky is mulling a plan to drop some Medicaid recipients from the rolls.

* Maine is proceeding with its groundbreaking Maine Rx program to negotiate with drug companies for rebates on behalf of uninsured patients, after getting a green light from the U.S. Supreme Court.

For drug makers, the carrot under Maine Rx is the inclusion of their products under a preauthorized formulary. The stick is a requirement that physicians get prior authorization for prescribing any drug whose manufacturer refuses to pay the rebate.

* Facing a reported budget gap of nearly $1 billion, Maryland is considering a scaling back of Medicaid services.

* Massachusetts produced a victory for pharmacy when the legislature failed to override Gov. Mitt Romney's veto of a controversial, $1.30 prescription tax. But efforts to cut dispensing fees to $2 for both branded and generic drugs continue.

* Michigan's new budget calls for imposition of a levy on retail prescriptions.

* New Hampshire is mulling an increase in Medicaid copays, but reportedly has scrapped plans to cut reimbursements to AWP minus 16 percent.

* Oregon has cut Medicaid reimbursements to pharmacies while lawmakers try to hammer out a budget.

* Washington State's Medical Assistance Administration reported it achieved "significant savings" through cuts in pharmacy-reimbursement rates, and through its "Therapeutic Consultation Services, under which clinical pharmacists review Medicaid patients prescription profiles to spot opportunities to switch them to preferred or generic drugs.

Not all doom and gloom

For their part, chain pharmacy leaders cite the nationwide Medicaid funding cuts as one of the industry's biggest hurdles.

"My concern--not just for Brooks but for all community pharmacy--is that we continue to face pressure in Medicaid rate-of-reimbursement reductions," said Dan Haron, vice president of pharmacy and professional affairs for Brooks. Most state Medicaid programs, he complained, just "take a commodity approach" to prescription costs, rather than looking at the role retail pharmacies could play in reducing costs.

"When the state of Massachusetts spends a dollar on a Medicaid prescription, 82 cents of it goes to the drug companies, and just 18 cents goes to the pharmacy, Haron noted. The problem is they re trying to control 82 percent of their cost, which is their driver, through the 18 percent we generate. And it will never work. So you have a failure to recognize the value of pharmacy services around patient care, a failure to recognize or consider a cost of doing business and, really, a failure to get their arms around the drug companies."

Rich Cognetti, chairman and chief executive of 64-store Kinney Drugs, also expressed concern about proposed Medicaid cuts of 50 percent in Kinney's home state of New York. "That's 15 or 16 percent of our business, he said in an interview earlier this year.

The industry's official response to the Medicaid funding crisis is summed up by NACDS in a position statement. Instead of focusing on reducing pharmacy reimbursement or limiting access to pharmacy services, states could increase savings in Medicaid and improve quality by enhancing their drug use review systems, which could provide better medical and pharmacy management for those individuals who are taking, multiple medications, noted the organization. In addition, savings could come through the use of disease management programs for individuals with certain conditions."

NACDS also expressed concern about "initiatives that increase Medicaid prescription copays because Medicaid recipients often can't afford to pay or will not pay these copays, and the states cannot reimburse pharmacies for these lost copays. This is tantamount to a pharmacy reimbursement reduction.