Reimbursement Cuts Will Undermine Pharmacy

The painful consequences of Medicare Part D have become all too apparent, with the sad news that the number of independent community pharmacies declined by 1152?5% of the total?last year.

The closures were reported in preliminary findings from the annual 2006 NCPA-Pfizer Digest nationwide survey. They appear to confirm the devastation resulting from the first year of Part D, because they show a sharp reversal of the growth trend in previous years.

We as community pharmacists helped millions of patients take advantage of the new drug benefit, ensuring that they received the drugs they needed despite the chaos and confusion that surrounded the program's early days. In return, we have been penalized by low reimbursements and slow payment, and many of us have been driven out of business altogether.

Other statistics from the NCPA survey reflect the pain felt by community pharmacists across the country. Average sales fell slightly, and average net operating income slumped by 30%.

Unfortunately, the changes in Medicaid reimbursement could squeeze margins further, making the 2007 financial picture even more ominous.

The switch to Average Manufacturers Price (AMP) basis is now due to take effect at the end of the year. We have long warned of the potential damage. Recent analysis from the Department of Health and Human Services Office of Inspector General (OIG) confirms that we were right to do so.

An OIG report states that, using the Centers for Medicare & Medicaid Services' proposed calculations, reimbursement would be less than the actual pharmacy acquisition cost for all but 6 of the 25 highest-expenditure drugs. This disturbing finding is due, the report says, to artificially low AMPs that do not reflect true market pricing. The Government Accountability Office, the federal watchdog, came to a similar conclusion.

Clearly, the effect could be disastrous. Independent pharmacies, with an average 93% of revenue from prescriptions last year, will initially be the hardest hit. As goes community pharmacy, so goes the profession, however. Cuts in reimbursement will undermine the viability of pharmacy, forcing us to deliver services at a loss or to stop serving the patients who need them the most.