MESSAGE
| DATE | 2006-05-03 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [NYLXS - HANGOUT] Medical Economics
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R.Ph.s told it's up to them to set their service fees
Apr 17, 2006
By: Fred Gebhart
Drug Topics
Lawrence Kocot
Some pharmacies will not survive the next 12 months. The longer pharmacy waits to break longstanding links between pharmacy product and pharmacy reimbursement, the bleaker the prospects.
"The reality is that reimbursements are declining," Lawrence Kocot, senior adviser to the administrator at the Centers for Medicare & Medicaid Services, told the National Council of State Pharmacy Association Executives. NCSPAE was meeting at the American Pharmacists Association's annual conference in San Francisco. "The more fundamental reality is that payment that continues to be tied to product is a threat [to pharmacy]. Third parties are looking at product costs. Service is what we have to focus on now, and it is up to pharmacy to get that value proposition across to the people who make the decisions."
Stephen Schondelmeyer
Medicare Part D brought the first rumblings of the financial crunch to come, Kocot said. Prescription drug plan contracts widely accepted by retail pharmacies lengthened payment cycles. Pharmacies are caught in a cash flow squeeze between drug plans that reimburse on a 15-day cycle and wholesalers expecting weekly payment. Once payment arrives, product reimbursement and dispensing fees are lower than retailers are accustomed to receiving from Medicaid and other programs.
The other shoe drops on Jan. 1, 2007. New Medicaid pricing policies based on average manufacturer price (AMP) rather than average wholesale price (AWP) will push reimbursement below product acquisition cost for most generic products.
Where CMS leads, Kocot reminded state association executives, private payers usually follow. "It is up to pharmacy and pharmacists to protect their own financial interests," he said. "There has to be a point where you reject the contract that is offered."
John Gans
That's going to be a tough choice when it comes to Medicaid. Beginning next January, product reimbursement under Medicaid will be capped at 250% of AMP. For most pharmacies, the switch will reduce payments by as much as 25%.
When it comes to generics, warned Stephen Schondelmeyer, director of the PRIME Institute at the University of Minnesota College of Pharmacy, reimbursement will be about 5% below cost. "Lawmakers have been duped into thinking that AMP represents pharmacy's product cost," he told association leaders. "But it ignores wholesalers and assumes that rebates flow to pharmacy. Starting Jan. 1, we will lose money on every generic dispensed under Medicaid, and generics are half of all Medicaid scripts. We will see pharmacies closing."
Eugene Lutz
John Gans, APhA executive VP and CEO, tried for a positive spin. "These are challenging times," he said. "But the opportunities for pharmacy are there like never before. We all know that AMP is a fake benchmark and staffers inside government know. We need to get to reimbursement based on our actual cost, a dispensing fee, and a professional service fee."
CMS recognizes pharmacy's problem, Kocot said, but the agency is limited to implementing changes mandated by lawmakers. Any change to separate product reimbursement from payment for professional services will have to come from pharmacy itself.
It's not an impossible task, said APhA president Eugene Lutz. Pharmacy is riding high as the profession that saved Medicare from total disaster in January.
The problem, Kocot noted, is that while pharmacy knows what a tremendous impact pharmacists can have on improving patient care and managing costs, no one else knows. Most payers recognize the importance of improving generic utilization rates, for example, but they don't recognize that R.Ph.s are key drivers in generic use. "The problem is that pharmacists are talking only to pharmacists," he said. Pharmacists publish in pharmacy journals, he explained, but payers and policy makers don't read pharmacy journals.
CMS wants that to change. It's pushing for the creation of an Ambulatory Quality Alliance, modeled on existing patient and hospital QA programs. The goal, Kocot said, is to bring pay for performance to all sectors of health care. "We want plans to pay pharmacists for performance and quality," he said. "For that to happen, you must be engaged in the process and stay engaged."
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