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N.Y. R.Ph.s quaking over proposed Medicaid pay cuts

If New York's Gov. George Pataki gets his way, pharmacy reimbursement rates for Medicaid and other state programs will be cut severely. Pharmacists across New York say the move may push many independent pharmacies out of business.

"If the cuts go through as proposed, I will be out of business," grumbled Ethan Asedo, owner of Miller Pharmacy in Staten Island, which does $2 million of Medicaid business every year. "I'm not superhuman. With greater expenses and less revenue, this business is going to die."

In an effort to close an $11.5 billion state budget gap, Pataki proposed a reduction in pharmacy reimbursement rates for Medicaid and another state insurance program from the current rate of average wholesale price minus 10% down to minus 15%. At that rate, pharmacy owners who do a majority of their business through Medicaid said they would not make enough money to cover their operating costs.

New York is not alone. According to the National Association of Chain Drug Stores, 12 states currently have proposals in the legislature to reduce pharmacy reimbursement rates. Seven states already passed reductions this year. Mississippi was the only state to defeat a proposal to reduce reimbursement rates.

"Pharmacies should not be the only ones taking the hit year after year when they are not writing the prescriptions," said Crystal Wright, VP of media relations at NACDS. "Medicaid patients should not get costly brand-name drugs when generics work just as well."

Several states, most notably Florida, have instituted preferred drug programs that reduce Medicaid costs through limiting prescriptions for brand-name drugs. In New York, the legislature passed a budget putting the reimbursement rate at AWP minus 12%—a 2% reduction from the current rate. Lawmakers, however, expect Pataki to veto their proposal.

Pataki also proposed raising Medicaid co-payments 50 cents for generics and $1.00 for brand-name drugs. Pharmacy advocates say that raising the co-pay will not make a big difference, since many Medicaid patients don't pay the fee, yet pharmacists must still dispense to them.

"If the governor's proposal goes through, I would foresee a collapse of Medicaid," said William Scheer, R.Ph., president of the New York City Pharmacist Society. "Even the 12% rate is unacceptable. It's either death by strangulation or death by hanging."

In Pataki's budget proposal, he said pharmacy spending in the Medicaid program has risen from $800 million in 1995 to a projected $3.3 billion in 2003. Pataki's office did not respond to requests for comment.

More than 95% of prescription drug costs are the cost the manufacturer charges for the medication, according to NACDS. Drug manufacturers earn an 18.6% profit margin, the highest of any industry. In 2000, the drug industry spent $16 billion on advertising and promotion.

"There are areas of this country where there is a shortage of pharmacists and they will be appreciated," said Asedo, who has owned his Staten Island pharmacy for 21 years. "I will move on."

Dan Ten Kate

The author is a writer based in New York.

Daniel Kate. N.Y. R.Ph.s quaking over proposed Medicaid pay cuts.

Drug Topics

May 19, 2003;147:16.