By John Coster
As the November 23 deadline approaches for the Joint Select Committee on Deficit Reduction to identify $1.2 trillion in savings over the next decade, its members are faced with an unenviable task. However, as these lawmakers seek new budget cuts, they should not overlook the fact that small business community pharmacies have given their fair share over the last several years.
Data compiled by NCPA demonstrates that over the last five years, cuts in state Medicaid programs along with implementation of Medicare Part D have reduced independent community pharmacies’ revenue by $15 billion, or 17% of their gross margin.
Medicare Part D and Medicaid already pay lower reimbursements than private plans, though private plan reimbursements are steadily declining as well. Additionally, in Medicaid many co-pays are uncollectable from patients and cannot be otherwise reimbursed, further diminishing payments. Small business community pharmacies derive approximately 92% of their revenue from filling prescriptions, half of which are Medicare and Medicaid prescriptions.
To partially mitigate this perilous trend, community pharmacy owners have implemented new technology and efficiencies and/or expanded into certain health niches. Even so, these cuts to Medicare, Medicaid and private plans have fueled a 64% increase in the number of small business community pharmacies operating at a loss. In 2010, approximately 23% of community pharmacies were operating at a loss, an increase from just 14% in 2005. Indeed, some local pharmacies have been forced to close.
No business can sustain operating with such losses for an extended period of time, and those that do face a decision — they can shut their does or opt to stop accepting Medicare and Medicaid patients. Small business community pharmacies are a primary source of healthcare in rural and inner-city areas. Most are located in communities with 50,000 people or less. Obviously, this represents a serious threat to patient access to care and would contradict the underlying purpose of the Medicare and Medicaid programs. Community pharmacies are dedicated to serving the needs of their patients and many offer free home delivery of prescriptions to patients.
The members of the joint committee should consider cost saving options that do not jeopardize patient access or community small businesses, such as the recommendations provided by NCPA. For example, we recommend that the committee promote generic alternatives to brand name medications, where appropriate. Generics are approximately 1/5 the cost their name brand counterparts and small business community pharmacies dispense them with greater frequency than mail order pharmacies owned by pharmacy benefit managers (PBMs). Additionally, the committee should require that PBMs pass through to plan sponsors all of the manufacturer rebates they receive.
These are common-sense solutions that NCPA suggested to the joint select committee in a letter sent on September 7th. These recommendations can help reduce the debt while maintaining patient access to their community pharmacist. Community pharmacists serve as a resource to their patients and assist them in areas such as adherence. Non-adherence to medication costs the healthcare system over $290 billion a year. Reducing the costs associated to non-adherence is key to reducing overall healthcare costs, including reducing costs in Medicare and Medicaid.