Margins are slim for community pharmacies, according to a report released this week by the Office of the Inspector General for the Department of Health and Human Services.
Organizations representing pharmacies used the results to further their argument that the system used to reimburse pharmacies for issuing prescriptions to Medicare beneficiaries is flawed.
The OIG, conducting the research at the request of 33 senators, found that Medicare Part D payments, excluding dispensing fees, to community pharmacies exceeded the pharmacies' drug acquisition costs by an estimated 18.1 percent.
Excluding rebates, Part D payments to pharmacies exceeded drug acquisition costs by an estimated 17.3 percent. The estimated difference between Part D payments and drug acquisition costs was $9.13 per prescription when rebates were included, and $8.78 when rebates were excluded.
The average dispensing fee paid to pharmacies was $2.27, which was about $2 less than the average Medicaid dispensing fee, OIG reported.
Under the prescription drug benefit, reimbursement is based on a private market nodel. CMS contracts with prescription drug plans and Medicare Advantage plans - commonly referred to as Part D sponsors - which then act as the payers and insurers for prescription drug benefits. Retail pharmacies contract with Part D sponsors to obtain reimbursement for prescription drugs dispensed to Part D beneficiaries. Sponsors pay pharmacies a rate for ingredient costs, which is usually a published average wholesale price of the drug minus a percentage, as well as a dispensing fee.
The National Community Pharmacists Association has been opposing the use of the formula, saying that it doesn't provide enough revenue on prescription sales to Medicare to cover costs. A response from the organization noted that income from Medicare Part D sales barely provide enough cash to cover expenses related to the prescription sales.
"While the report acknowledges that it does not account for all costs of dispensing prescriptions, we applaud the work of the OIG in confirming the financial difficulties Part D has placed on community pharmacy," said Bruce Roberts, executive vice president of the NCPA. "Its estimate that local community pharmacies received an average Part D dispensing fee of $2.27 per prescription reinforces our position that community pharmacies are not adequately reimbursed for the costs of dispensing drugs."
With the $2.27 dispensing fee, the compensation to pharmacies averages $11.40 per prescription, Roberts noted. "The recent study by the accounting firm Grant Thornton found that the average cost to dispense a prescription drug is $10.50, yielding 90 cents, on average, per Medicare prescription," he said. "With an average prescription price of $68.26, this nets a mere 1.3 percent net profit margin."
Community pharmacies also are complaining that Part D sponsors are not providing timely reimbursement for beneficiary claims, further exacerbating problems with the Medicare program.
"When you also consider the slow rate of reimbursement, as evidenced by a recent University of Texas study, pharmacists may be forced to close their doors, or stop participating in these government programs and patient access to the medicines they need will be seriously threatened," Roberts said.