Small pharmacies say they are threatened by a new federal law to take effect in January that could cause many of them to close, according to Charles Sewell, senior vice president of the National Community Pharmacists Association (NCPA).
Last week Sewell testified before the House Small Business Committee calling for Congress to strengthen the Regulatory Flexibility Act (RFA), which requires federal agencies to examine and report on proposed regulations on small businesses.
At the Dec. 6 hearing, Sewell said the Centers for Medicare and Medicaid Services has not adequately explored the ramifications of its Medicaid generic prescription drug reimbursement regulations and the impact they will have on 23,000 small business independent pharmacies.
"CMS' half-hearted attempt to follow the Regulatory Flexibility Act is going to spawn a financial crisis for independent pharmacies and a health crisis for their patients," said Sewell. "Simply put, CMS was derelict in its duty by not conducting a thorough economic study of its proposed or final regulations for Medicaid generic drug reimbursement. Putting more teeth into this law will ensure small businesses are not an afterthought when creating regulations."
CMS' Medicaid generic drug reimbursement regulation is based on CMS' Average Manufacturer Price. Sewell said AMP does not accurately reflect retail costs to pharmacies.
According to a Government Accountability Office study, independent pharmacies would face average reimbursements 36 percent below their cost under CMS' new regulation.
The AMP rule will take effect on Jan. 30 next year. "At that time independent pharmacies, which are often located in underserved rural and urban communities, will be forced to make the business decision to either limit or drop out of Medicaid, or even go out of business," Sewell said. "Their patients, with their access to prescription drug services curtailed, will have to explore other, more expensive health care options such as emergency room visits."
NCPA is pursuing a variety of legal and legislative remedies to delay or change CMS' AMP regulation, Sewell said.
If studies exist showing the rule will significantly impact small businesses an agency cannot simply dismiss them and proceed with implementation, Sewell said.
Thomas Sullivan, chief counsel for advocacy at the Small Business Administration, who also testified at the hearing, said the biggest loophole in the RFA is it doesn't require agencies to analyze indirect impact.
Ninety-two percent of businesses in every state are small businesses, Sullivan said. One regulation may not have a dangerous effect, but layers of regulations often impose a "crippling cumulative burden" to small businesses over time, he added.
A recent GAO report calls for more transparency in federal agency analysis of regulatory impact. Sullivan"s office recommended that the RFA be amended to review all rules periodically.
Reps. Nancy Boyda (D-Kan.) and Jo Ann Emerson (R-Mo.) introduced a bill July 24 to protect rural pharmacies from potential financial disaster imposed by the new rule. The bill has been referred to the House Subcommittee on Health.