Medicare Part D struggles continue for pharmacies

Davidson, now 69 years old, owned and operated Frisco Pharmacy in Joplin, the store his father opened in 1944, until March 9.

That was the day Davidson closed his doors for the last time, selling his business to May’s Drug Warehouse, a former competitor. Davidson attributes the decision, in large part, to the changes caused by Medicare’s Part D prescription drug plans.

“On Jan. 1, 2006, the whole pharmacy picture changed,” Davidson said.

When Springfield Business Journal talked to area pharmacists in February 2006, they cited low reimbursement rates and late payments for Part D prescriptions as major issues. A year later, they say the situation isn’t much better.

“It hasn’t improved,” said Lynn Morris, owner of Ozark-based Family Pharmacy, a regional chain of 16 pharmacies. “I guess the only thing that’s improved is that we’re used to it.”

Medicare’s Part D prescription drug program, according to the Centers for Medicare and Medicaid Services Web site, was implemented in 2006 with the purpose of providing seniors and the disabled with “the first comprehensive prescription drug benefit ever offered under the Medicare program.”

While the program may help consumers, it’s taking a toll on pharmacies.

Melody Savley, co-owner of Alps Pharmacy, said reimbursement rates from insurance companies providing services are down significantly; as a result, the pharmacy’s margins for 2006 were down 3 percent from 2005, though Savley declined to disclose current profits.

Davidson also pointed to lower reimbursement rates – a problem he said is compounded by the fact that pharmacists have little to no say in what they charge patients for those prescriptions.

“The thing the public doesn’t understand about this business is that seldom do we have the option to price a prescription according to what we’d like to sell it for,” he said. “We’re almost always dictated to by the insurance companies. It’s ridiculous.”

The check’s in the mail

According to Family Pharmacy’s Morris, some insurers take as long as 90 days to reimburse pharmacies for Part D patients. Normally, reimbursement takes between two weeks to a month, local pharmacists said.

Morris said his pharmacies have been able to get by through increased volume – the number of prescriptions filled has increased by double digits for each of the last several years. According to its Web site, the Family Pharmacy chain fills some 6,000 prescriptions every daily.

“Volume is the name of the game,” Morris said. “Volume, at this point, can still offset increased costs of doing business and decreased reimbursement and slow pay of insurance companies.”

National figures indicate that Medicare was responsible for an 8.6 percent increase in prescription volumes nationwide in 2006.

Though Family Pharmacy is large enough to weather the storm, at least for now, Morris did say his company had to borrow money last year for the first time in more than a decade.

Smaller operations are feeling more of a crunch. Alps co-owner Savley said her pharmacy is hit hard by late reimbursement payments.

“If 85 percent of (your business) is running through insurance, you’re waiting for most of your money, but we have to pay our wholesalers monthly,” Savley said. “We’re out several hundred thousand dollars in payment because most (insurance) companies are behind.”

Help on the way?

While representatives of the Centers for Medicare & Medicaid Services did not return a call for comment by press time, Leslie Norwalk, CMS deputy administrator, in May told a U.S. House of Representatives subcommittee that the insurance companies are working to fix the problem.

“A clear majority of (prescription drug plans) are paying pharmacies well within the industry standard of 30 days from the time a clean electronic claim is submitted to the time a pharmacy receives payment,” Norwalk said.

There is also new legislation in the U.S. House of Representatives that is intended to help improve the process. House Resolution 1474, the Fair and Speedy Treatment of Medicare Prescription Drug Claims Act of 2007, was introduced March 13. The bill would require complete and accurate Medicare Part D prescription drug claims submitted electronically to be paid within 14 days by electronic funds transfer; paper claims would have to paid within 30 days.

“Pharmacies have been forced to deal with payment delays, forcing many of these small businesses to borrow tens of thousands of dollars to cover payroll, wholesaler bills and other basic operating costs,” said Bruce Roberts, executive vice president and CEO of the National Community Pharmacists Association, in a news release. “Hundreds already have closed, leaving many rural and inner-city areas without these vital community health resources.”

Family Pharmacy’s Morris applauded the effort.

“We’ve settled into (the process) now, but the law is still flawed and the law needs to be changed,” Morris said. “Luckily, there’s people trying to get the law changed.”

The bill was sponsored by 11 members of the House, including Missouri Republicans Jo Ann Emerson and Sam Graves.

The bill, if passed by the House, also would require Senate approval.

For Davidson, however, the decision to get out of the pharmacy industry is already made. His building is empty, his business having been combined with May’s existing operations, and he is fulfilling a 30-day contract serving May’s as a pharmacist. That work, he said, will be done in April, and he’ll leave behind an industry that once had a straightforward appeal.

“I remember the good old days – when somebody walked in, picked up their prescription, put their money on the counter, took their bottle and walked out the door,” Davidson said. “It’s not like that anymore. I had a hard time adjusting to it. I was 69 years old, and frankly, I just ran out of patience.”[[In-content Ad]]