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Medicare Drug Program News
Medicare Payment Delays Driving Pharmacies Out of
Business, They Say
Average 3 store closures per day in 2006, first
year of drug program
 June
14, 2007 – Senior citizens may be getting their drugs cheaper through
Medicare Part D, but they may soon have problems finding a place to get
their prescriptions filled. In 2006, on average, more than three
community pharmacies closed everyday, as a result of slow reimbursement
by Medicare during the first year of the prescription drug program,
according to the National Community Pharmacists Association.
The number of pharmacies shrank from 24,500 to
23,348, which is a loss of 1,152 stores or 5 percent, after years of
steady growth. This is a development that hurts patients and reduces
competition in the pharmacy marketplace, NCPA said in a press release.
Low and slow reimbursement under the Medicare Part
D prescription drug plan has dramatically undermined the viability of
thousands of independent community pharmacies, and driven many out of
business, the release says.
For the first time since the beginning of the
Medicare drug program on January 1, 2006, hard data on independent
community pharmacy operations reveals the disproportionate negative
impact of the program on these vital community health resources, says
NCPA.
The NCPA has released preliminary data from its
annual NCPA-Pfizer Digest, which it describes as a comprehensive
financial and demographic survey of the nation’s independent community
pharmacies. It shows a downturn in several key economic measures for the
first time in a decade.
NCPA said, “The most troubling Digest figures from
2006 are a multitude of store closings, stagnation in the average total
prescription sales, and plummeting net operating income.”
“The only significant factor in the marketplace to
explain these precipitous changes was the launch of the Center for
Medicare and Medicaid Services’ (CMS) prescription drug plan under
Medicare Part D.”
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Today's Battle in
Congress |
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Medicare Payment Delays Cause Community
Pharmacies To Close
June 14, 2007 - Medicare
prescription drug plans can take as long as 45 days to reimburse
pharmacies for medications dispensed, and the delays have caused
three community pharmacies to close each day since the program
began, according to groups that represent community pharmacies,
CongressDaily reports.
According to the
National
Community Pharmacists Association,
delays in reimbursements from Medicare prescription drug plans
for medications dispensed have forced community pharmacies on
average to open $700,000 lines of credit, compared with $250,000
in the month before the program began.
The number of community
pharmacies decreased by 1,152 to 23,348 in 2006, compared with
increases of 500 and 150 in 2005 and 2004, respectively, Douglas
Hoey, senior vice president and chief operating officer for NCPA,
said. Charles Sewell, senior vice president of government
affairs for NCPA, said that
House Energy
and Commerce Committee Chair
John Dingell (D-Mich.) and
House Ways and
Means Committee Chair Charles
Rangel (D-N.Y.) have told the group they will seek to address
the issue. Rep. Mike McIntyre (D-N.C.) called the problem a
"double whammy" because both community pharmacies and patients,
many of whom live in rural and low-income urban areas, are
affected.
In March, Reps. Marion Berry
(D-Ark.), Stephanie Herseth Sandlin (D-S.D.), Walter Jones (R-N.C.)
and Roger Wicker (R-Miss.) introduced a bill (HR
1474) that would require
Medicare prescription drug plans to reimburse pharmacies within
14 days.
The
Pharmaceutical
Care Management Association,
which represents Medicare prescription drug plans, opposes the
requirement, which the group maintains would cost Medicare and
patients more than $9 billion over 10 years. PCMA said that
members have promised to reimburse pharmacies within 30 days (Edney,
CongressDaily, 6/14). |
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The program’s “low and slow” reimbursements force
many community pharmacies to take out large loans to maintain cash flow.
In this negative environment pharmacy owners have been forced to
consider curtailing services or even going out of business, according to
NCPA.
“The Digest numbers paint a disturbing picture of
the viability of many community pharmacies since Medicare Part D’s
implementation,” said Bruce Roberts, RPh, executive vice president and
CEO of NCPA.
“Patient access to medication is jeopardized when
stores are forced out of business by government programs. This
contradicts Part D’s original intent of ensuring drug coverage to all
Medicare recipients.
“In fact, former CMS Administrator Mark McClellan
once proclaimed Part D’s ‘access requirements will only be satisfied
with broad participation of community pharmacies.’ That goal can only be
met if Congress passes legislation ensuring community pharmacies are
paid promptly and have business negotiations rights.”
The Digest also revealed the average community
pharmacies prescription drug sales are flat with the number rising from
$3.48 million to $3.49 million in the past year. This is a significant
departure from 10 years of slow but steady growth.
Every small business owner has a financial bottom
line they watch meticulously. Last year community pharmacies’ average
gross profits declined from 23.6 percent to 22.8 percent. A true warning
sign, NCPA says, of economic peril is revealed by net operating income
being down 30 percent, from 3.7 percent to a record low 2.6 percent.
Between hefty loans to maintain cash flow due to
slow reimbursement, and increased pharmacy administrative cost to
process Medicare Part D claims, operating expenses increased.
“Community pharmacies have always shown a
remarkable ability to adapt to emerging challenges and continue to
provide for the health care needs of their patients,” said NCPA
President John Tilley, RPh, a pharmacy owner in Downey, California.
“But Medicare Part D, as currently configured, is a
challenge that can’t be overcome by sheer business acumen and ingenuity.
The preliminary Digest numbers confirm the anecdotal evidence that has
poured in over the past year. Part D reimbursements are bleeding
community pharmacies dry. Sadly, the forecast for next year’s Digest
findings will be even more bleak if CMS’ pending cuts targeting Medicaid
pharmacy reimbursement cuts are not corrected.”
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Highlights of NCPA-Pfizer Digest
Preliminary Finding
All information is from 2006, the first
year of the Medicare Part D prescription drug plan.
40% of the nation’s 58,661 drugstores are
independent pharmacies
There are 23,348 single-store independent
pharmacies, independent chains, independent franchises,
independent long-term care and home I.V. pharmacies, and
independent pharmacists-owned supermarket pharmacies
• Down 5% from 2005
Independent pharmacy: $87 billion
marketplace
• Down $5 billion or 5% from 2005
Independent pharmacy prescription sales:
$81 billion
• Down $4 billion or 5% from 2005
Prescription medicines are our business:
93% of annual sales are Rx medicines
• Up 1% from 2005
Average independent pharmacy net
operating income: 2.6% is a record low
• Down 30% from 2005
Average independent pharmacy sales: $3.73
million
• Down 0.5% from 2005
Average prescription sales: $3.49 million
• Up 1% from 2005
Generic drug utilization
• 58% of drugs dispensed by independent pharmacies are
generics
• Up from 56% in 2005
Staffing in independent pharmacies
• Average independent employs 13.7 full-time equivalent
(FTE) employees
• Average independent employs 3.3 FTE pharmacists (including
owner)
• Average independent employs 4.8 FTE technicians |
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Editor’s Notes:
The National Community Pharmacists Association,
founded in 1898 as the National Association of Retail Druggists (NARD),
represents the pharmacist owners, managers, and employees of more than
24,000 independent community pharmacies across the United States. The
nation's independent pharmacies, independent pharmacy franchises, and
independent chains dispense nearly half of the nation's retail
prescription medicines.
The nation's independent pharmacists are small
business entrepreneurs and multifaceted health care providers who
represent a vital part of the United States' health care delivery
system. They have roots in America's communities.
To learn more, go to
www.ncpanet.org.
The Digest was first compiled more than 70
years ago and is supported through an unrestricted educational grant
from Pfizer Inc. Surveys continue to be received and tabulated by the
Seattle, Washington firm Business Resource Services, Inc. Final figures,
which could show slightly different results based on a larger pool of
survey responses, will be released in conjunction with the NCPA 109th
Annual Convention and Trade Exposition this October in Anaheim,
California.
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