Part D Dilemma

“I think you're going to see a fourth to a third of the (independent pharmacies) close in the next 12 months unless (insurance companies) make better reimbursement rates … and start working out all the bugs,” said Lynn Morris, president and founder of Ozark-based Family Pharmacy Inc.

Part D began Jan. 1 as Medicare's first comprehensive prescription drug plan. Consumer issues have plagued the program's first month as many of its 24 million enrollees have experienced flawed registration and mismatched coverage.

Much of the consumer confusion is due to Part D's plethora of choices: 17 insurance companies offering 51 plans in southwest Missouri alone, according to Family Pharmacy Director of Pharmacy Services Carrie Tennis.

On the surface, Part D looks like a windfall for pharmacists who are serving an influx of customers.

However, Morris said Part D is the reason why he's filled more prescriptions this year than last through early February while making $1.2 million less as he waits for reimbursements.

“It's costing me a lot of money to help get this program started,” he said.

Reimbursement ruckus

Morris is not alone.

Melody Savley, co-owner of Alps Pharmacy, 2650 W. Kearney, Ste. 116, saidthat because Congress didn't mandate insurance reimbursement rates or payment schedules, pharmacies have received delayed payments with rates that aren't high enough to cover operating costs.

“That has created a national cash-flow crises for pharmacies,” she said. “I don't know where all of our checks are yet or when they're going to pay us.”

Even though patient volume in January was 3 percent above December, Alps co-owner Don Savley said his pharmacy's operating costs increased 12.6 percent while its profit margin decreased 5.5 percent, resulting in a cash flow half of what it was in December.

“We believe they're adequately reimbursed,” said Humana spokeswoman Mary Sellers, defending her insurance company's role in Part D.

Sellers attributesthe troubles to “growing pains” undera brand-new program in which 1.2 million people nationallyhave registered with Humana.

However, pharmacist Savley said she's taking a loss on every prescription she fills through Humana's Part D coverage.

Closings, job losses

Mike James, national governmental affairs director for the Community Pharmacists Congressional Network, said at least 35 percent of the 15,000 pharmacies he represents are in danger of closing this year because of reimbursement rates he said are half of what they were.

For example, he said margins for Missouri pharmacies dropped from $3.95 per prescription to $1.50 per prescription for Medicaid patients that automatically switched to Part D. Patients who are eligible for both Medicare and Medicaid were automatically placed in Part D by the government.

“They're not reimbursing pharmacies at a rate in which they can maintain their cost of doing business,” James said. “Every one of them will have to lose jobs.”

While Morris said large pharmacies such as his - 19 locations throughout the Ozarks - aren't at risk of closing, James said one East Coast pharmacy owner with annual sales of $20 million has expressed fear of closing.

Profit margins

Generally operating on 2.5 percent profit margins, James said pharmacists can't afford to take a 50 percent hit in a large segment of their customer base.

Morris said 10 unnamed pharmacy owners contacted him about selling their stores before things got bad.

“There is a serious problem here,” James said.

“These guys out there screaming … are not crying wolf.”

Responding to the fears of shop closings and job losses, Humana's Sellers said, “I think they're probably overreacting, quite frankly.”

Sellers and Blue Cross Blue Shield of Missouri spokeswoman Deb Wiethop declined to address specific reimbursement rates.

But Sellers said Humana pays pharmacies every 10 days and that they sent payments twice in January.

However, Family Pharmacy's Morris said he's not receiving reimbursements regularly like he had before - the fifth and 20th of every month for the dual-eligible patients through the state.

Legislators' roles

James has been sending letters to member pharmacies urging them to contact political representatives in an effort to increase Part D reimbursement rates.

Southwest Missouri Congressman Roy Blunt said reimbursement rates should be monitored, but he didn't foresee pharmacies closing.

“I've really worked hard with the pharmacy associations on this topic,” Blunt said. “It's important to me that the local pharmacist is treated fairly.”

A sinister plot?

While online and mail-order pharmacies have been around for a while, Community Pharmacists Congressional Network representative Mike James said insurance companies are soliciting business away from brick-and-mortar pharmacies with letters to Part D customers heralding their mail-order pharmacies.

“What you're seeing is the mail-order companies and insurance companies that are involved with mail-order companies saying … 'We're going to move everybody to this plan that's going to devastate community retail pharmacies - chains and independents - and then we're going to move all those people over to mail order,'” James said.

Local pharmacists claim that the letters mislead seniors into thinking that use of mail-order pharmacies is required for coverage.

Blue Cross Blue Shield of Missouri spokeswoman Deb Wiethop said mail-order pharmacies are simply an option, dispelling the idea of a plot to lure customers to insurance-owned mail-order pharmacies.

“You do have some savings by using the mail order, so we think that's the incentive on it,” Wiethop said.

“This mail order (option) is nothing new.”

She said any potential customer migration would have nothing to do with solicitation and everything to do with saving customers money.

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