Medicare Part D: A Financial Drain for Pharmacies?
Medicare Part D: A Financial Drain for Pharmacies?
The new Medicare drug benefit established earlier this year was expected to be a boon for pharmacies, granting beneficiaries greater access to prescription medications by making the drugs more affordable. However, it now appears that the federal program is instead threatening the financial future of many independent pharmacies, and pharmacists around the country are outraged.
At the beginning of 2006, the federal government began offering prescription drug coverage for millions of Medicare beneficiaries through the new Part D plan. Medicare contracts with private insurance companies and pharmacy benefit managers (PBMs) to administer the plan, and therein lies the problem. Pharmacists charge that these private companies pay them too little and too late, leaving pharmacies holding the bag and putting them at considerable financial risk.
For example, before Part D was initiated, pharmacies generally were reimbursed in 7 to 15 days for patients covered by state Medicaid programs. Drug benefits for those individuals are now included in the federal Medicare drug program, but pharmacists say that Part D drug plans may take 30 to 45 days to reimburse them for a dispensed drug. This creates a financial burden for pharmacists who must pay their wholesalers every 2 weeks.
Independent pharmacists also feel that PBMs have set the reimbursement rates too low, leaving them with the tough decision to either accept the low rates or refuse to fill Part D prescriptions. As a result of these lower and later reimbursements, some independent pharmacies have had to take out loans to resolve their cash-flow problems.
Susan Bishop, Director of Regulatory Affairs for the American Pharmacists Association (APhA), said the Medicare Part D program started off with glitches, but she believes that many of the issues are now being addressed.
"Most Part D plans are paying the pharmacist based on a contracted rate, which varies among the plans, but is typically every 30 days," she said. "Over the past few months, pharmacists have noted some improvements in the overall payment system, but some plans continue to reimburse pharmacies later than their contracted time frame. Some pharmacies have not received their reimbursement checks from plans until weeks or months later, without an explanation."
Although Part D plans are encouraged to pay pharmacies according to the terms of their contracts, there is no penalty for failing to do so. The Centers for Medicare and Medicaid Services (CMS), the federal agency administering the new national drug benefit, has only said that it will take such behavior into account when renewing plan contracts.
Unfortunately, pharmacies are in a tougher situation. If they cannot pay their bills or their pharmacy wholesalers on time, they face immediate financial penalties.
Charlie Sewell, Vice President of Government Affairs for the National Community Pharmacists Association (NCPA), said he believes the contracts between Part D plans and pharmacies are unfair.
"The Part D plans gave pharmacies non-negotiable contracts, which insisted upon the payment time frame and the reimbursement amount," he said. "Pharmacies were placed in a situation that if they didn't sign the contract, then they could risk losing the business."
Richard Burge, owner of Baneth's Pharmacy, an independent pharmacy in Menlo Park, California, said he finally gave up on the Medicare Part D program.
"I had to restore my Part D cash flow problem by completely pulling out of the Medicare drug program and losing more than a third of my patients," he said. "The current Medicare Part D reimbursement system is designed in a way in which the pharmacist is unable to earn a fair profit. CMS pays the Part D plan at the beginning of the month a fixed amount for every Medicare beneficiary, regardless of the medication. The Part D plan then pays the PBM which, in turn, pays a lesser amount to the pharmacist based on a non-negotiated, take-it-or-leave-it, contracted rate for the medication."
Before he withdrew from the Medicare program, Burge said, he was receiving payments from Part D plans 5-9 weeks after the claim was submitted, at a rate that was unprofitable.
NCPA official Sewell said he believes the situation is only going to get worse for community pharmacies as debts continue to accumulate. Since the implementation of Part D, he has seen an increasing number of pharmacies close or be forced to the verge of bankruptcy due to financial pressures caused by the federal drug program. According to NCPA's records, about 275 independent pharmacies have closed this year due to Part D-related issues, and Sewell foresees more closures in the future.
In rural areas, this problem could have a direct effect on patients.
"When rural pharmacies shut their doors, patients usually have to travel much further for their prescriptions, and often times this means not receiving prescriptions when they are needed," Sewell said.
In a recent survey of independent community pharmacies conducted by the NCPA, more than 90% of respondents said their cash flow was worse now than before Medicare Part D. More than 60% said they had obtained outside financing - from banks, wholesalers, credit unions, or family members - to cover financial shortfalls caused by the federal drug program.
In fact, according to the NCPA survey, the average balance owed to pharmacies by Part D plans is just under $70,000. Many independent pharmacists with high Medicaid and Medicare populations are struggling to serve their patients, meet their employees' salaries, and pay their wholesalers without a consistent cash flow.
Meanwhile, Burge and other independent pharmacy owners recently received letters from Walgreens, the country's largest drugstore chain, offering to buy their businesses and hire them as employees. The irony is that Walgreens owns and operates Walgreens Health Initiatives (WHI), one of the PBMs that pharmacists have accused of being slow to pay them. Burge said he considers it a conflict of interest for Walgreens to control reimbursement rates and payment schedules, then try to acquire pharmacies that are struggling due to those very conditions.
Michael Polzin, Director of External Communications for WHI, said that most pharmacies are receiving payments from WHI within the 30-day contracted time frame.
"I can recall one instance in which a pharmacy received a late payment, but it was due to the agency that the independent pharmacy contracted [with] to issue payments," he said. "WHI sent the payment to the agency, and the check was held before it was finally sent to the pharmacy."
As for the letter sent to pharmacies offering to acquire their businesses, Polzin said he had heard mostly favorable responses.
"Walgreens sent the letter because we had heard that many pharmacy owners were interested in selling their businesses," he said. "Walgreens has received almost a 98% positive feedback response from those that received the letter."
CMS officials also have taken the position that reimbursements are being made in a time frame that pharmacies are accustomed to, and within which they know how to operate.
"Interruptions in cash flow occurred as pharmacies switched from the system used by their respective state Medicaid payment systems to those of the Medicare prescription drug plans," CMS Deputy Administrator Leslie Norwalk recently told the House Energy and Commerce Subcommittee on Health. "However, a clear majority of PDPs [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 a recent CMS survey found that up to 18 of the top 20 PDPs pay pharmacy claims on a twice-a-month billing cycle of 15 days or less. A 15-day billing cycle generally provides pharmacies with payments within 21-25 days. However, the CMS later told a reporter that the agency had based its assertions on an analysis of drug plans' own accounts, and that pharmacists were not included in that survey.
In an effort to save community pharmacies, pharmacists from across the United States recently met on Capitol Hill to lobby for improvements to the Medicare Part D program. They expressed support for a bill introduced in the House, called the Fair and Speedy Treatment (FAST) of Medicare Prescription Drug Claims Act of 2006 (H.R.5182), which would protect community pharmacists from being forced out of business by inadequate or slow reimbursements and unclear claims processing. The bill was introduced by a bipartisan team, Marion Berry (D-AR), who is also a pharmacist, and Walter B. Jones (R-NC). The bill currently has 119 cosponsors in the House.
Specifically, the bill would require drug plans to pay pharmacists within 14 days for clean claims submitted electronically, and within 30 days for all paper claims. It would also require drug plans to notify pharmacists promptly if there were problems with submitted claims.
In addition, the bill sets minimum payment levels for dispensing generic drugs, as an incentive for pharmacists to offer the less expensive generics. It also would prohibit drug plans from issuing "co-branded" cards that can confuse beneficiaries about which pharmacies they can use.
The FAST legislation also builds on a provision in the 2003 Medicare law establishing guidelines for medication therapy management programs offered by drug plans. It calls for a 2-year pilot program that would enlist pharmacists to provide one-on-one medication counseling to their high-risk senior patients.
A companion bill has been introduced in the Senate, called the Pharmacists Access and Recognition in Medicare (PhARM) Act (S.2563). It was introduced by Thad Cochran (R-MS) and is cosponsored by Michael Enzi (R-WY) and Jim Talent (R-MO), along with 16 others. Although similar to the House bill, a key difference is that the PhARM Act would also require Part D plans to pay interest on claims that are not paid on time. Many pharmacy organizations are supporting these bills, including the NCPA, the APhA, and the National Association of Chain Drug Stores.
However, Part D plans argue that Congressional legislation requiring faster payments would force them to create entirely separate payment processing systems for Medicare claims. The Pharmaceutical Care Management Association, which represents many PBMs, has expressed opposition to the proposed legislation, arguing that pharmacies should be paid on an every-30-days schedule, consistent with how doctors and hospitals are paid under Medicare Parts A and B.
But pharmacists across the country undoubtedly will continue pushing for the passage of these bills, and pharmacy organizations are urging members to contact their legislators and tell them their own Part D stories. While continuing to support the federal government's attempts to expand access to prescription medications, pharmacy advocates argue that such health initiatives should not be carried out at the expense of frontline healthcare professionals.
The new Medicare drug benefit established earlier this year was expected to be a boon for pharmacies, granting beneficiaries greater access to prescription medications by making the drugs more affordable. However, it now appears that the federal program is instead threatening the financial future of many independent pharmacies, and pharmacists around the country are outraged.
At the beginning of 2006, the federal government began offering prescription drug coverage for millions of Medicare beneficiaries through the new Part D plan. Medicare contracts with private insurance companies and pharmacy benefit managers (PBMs) to administer the plan, and therein lies the problem. Pharmacists charge that these private companies pay them too little and too late, leaving pharmacies holding the bag and putting them at considerable financial risk.
For example, before Part D was initiated, pharmacies generally were reimbursed in 7 to 15 days for patients covered by state Medicaid programs. Drug benefits for those individuals are now included in the federal Medicare drug program, but pharmacists say that Part D drug plans may take 30 to 45 days to reimburse them for a dispensed drug. This creates a financial burden for pharmacists who must pay their wholesalers every 2 weeks.
Independent pharmacists also feel that PBMs have set the reimbursement rates too low, leaving them with the tough decision to either accept the low rates or refuse to fill Part D prescriptions. As a result of these lower and later reimbursements, some independent pharmacies have had to take out loans to resolve their cash-flow problems.
Susan Bishop, Director of Regulatory Affairs for the American Pharmacists Association (APhA), said the Medicare Part D program started off with glitches, but she believes that many of the issues are now being addressed.
"Most Part D plans are paying the pharmacist based on a contracted rate, which varies among the plans, but is typically every 30 days," she said. "Over the past few months, pharmacists have noted some improvements in the overall payment system, but some plans continue to reimburse pharmacies later than their contracted time frame. Some pharmacies have not received their reimbursement checks from plans until weeks or months later, without an explanation."
The Waiting Game
Although Part D plans are encouraged to pay pharmacies according to the terms of their contracts, there is no penalty for failing to do so. The Centers for Medicare and Medicaid Services (CMS), the federal agency administering the new national drug benefit, has only said that it will take such behavior into account when renewing plan contracts.
Unfortunately, pharmacies are in a tougher situation. If they cannot pay their bills or their pharmacy wholesalers on time, they face immediate financial penalties.
Charlie Sewell, Vice President of Government Affairs for the National Community Pharmacists Association (NCPA), said he believes the contracts between Part D plans and pharmacies are unfair.
"The Part D plans gave pharmacies non-negotiable contracts, which insisted upon the payment time frame and the reimbursement amount," he said. "Pharmacies were placed in a situation that if they didn't sign the contract, then they could risk losing the business."
Richard Burge, owner of Baneth's Pharmacy, an independent pharmacy in Menlo Park, California, said he finally gave up on the Medicare Part D program.
"I had to restore my Part D cash flow problem by completely pulling out of the Medicare drug program and losing more than a third of my patients," he said. "The current Medicare Part D reimbursement system is designed in a way in which the pharmacist is unable to earn a fair profit. CMS pays the Part D plan at the beginning of the month a fixed amount for every Medicare beneficiary, regardless of the medication. The Part D plan then pays the PBM which, in turn, pays a lesser amount to the pharmacist based on a non-negotiated, take-it-or-leave-it, contracted rate for the medication."
Before he withdrew from the Medicare program, Burge said, he was receiving payments from Part D plans 5-9 weeks after the claim was submitted, at a rate that was unprofitable.
Caught in the Financial Crunch
NCPA official Sewell said he believes the situation is only going to get worse for community pharmacies as debts continue to accumulate. Since the implementation of Part D, he has seen an increasing number of pharmacies close or be forced to the verge of bankruptcy due to financial pressures caused by the federal drug program. According to NCPA's records, about 275 independent pharmacies have closed this year due to Part D-related issues, and Sewell foresees more closures in the future.
In rural areas, this problem could have a direct effect on patients.
"When rural pharmacies shut their doors, patients usually have to travel much further for their prescriptions, and often times this means not receiving prescriptions when they are needed," Sewell said.
In a recent survey of independent community pharmacies conducted by the NCPA, more than 90% of respondents said their cash flow was worse now than before Medicare Part D. More than 60% said they had obtained outside financing - from banks, wholesalers, credit unions, or family members - to cover financial shortfalls caused by the federal drug program.
In fact, according to the NCPA survey, the average balance owed to pharmacies by Part D plans is just under $70,000. Many independent pharmacists with high Medicaid and Medicare populations are struggling to serve their patients, meet their employees' salaries, and pay their wholesalers without a consistent cash flow.
Meanwhile, Burge and other independent pharmacy owners recently received letters from Walgreens, the country's largest drugstore chain, offering to buy their businesses and hire them as employees. The irony is that Walgreens owns and operates Walgreens Health Initiatives (WHI), one of the PBMs that pharmacists have accused of being slow to pay them. Burge said he considers it a conflict of interest for Walgreens to control reimbursement rates and payment schedules, then try to acquire pharmacies that are struggling due to those very conditions.
Michael Polzin, Director of External Communications for WHI, said that most pharmacies are receiving payments from WHI within the 30-day contracted time frame.
"I can recall one instance in which a pharmacy received a late payment, but it was due to the agency that the independent pharmacy contracted [with] to issue payments," he said. "WHI sent the payment to the agency, and the check was held before it was finally sent to the pharmacy."
As for the letter sent to pharmacies offering to acquire their businesses, Polzin said he had heard mostly favorable responses.
"Walgreens sent the letter because we had heard that many pharmacy owners were interested in selling their businesses," he said. "Walgreens has received almost a 98% positive feedback response from those that received the letter."
CMS officials also have taken the position that reimbursements are being made in a time frame that pharmacies are accustomed to, and within which they know how to operate.
"Interruptions in cash flow occurred as pharmacies switched from the system used by their respective state Medicaid payment systems to those of the Medicare prescription drug plans," CMS Deputy Administrator Leslie Norwalk recently told the House Energy and Commerce Subcommittee on Health. "However, a clear majority of PDPs [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 a recent CMS survey found that up to 18 of the top 20 PDPs pay pharmacy claims on a twice-a-month billing cycle of 15 days or less. A 15-day billing cycle generally provides pharmacies with payments within 21-25 days. However, the CMS later told a reporter that the agency had based its assertions on an analysis of drug plans' own accounts, and that pharmacists were not included in that survey.
Pharmacists Go to Washington
In an effort to save community pharmacies, pharmacists from across the United States recently met on Capitol Hill to lobby for improvements to the Medicare Part D program. They expressed support for a bill introduced in the House, called the Fair and Speedy Treatment (FAST) of Medicare Prescription Drug Claims Act of 2006 (H.R.5182), which would protect community pharmacists from being forced out of business by inadequate or slow reimbursements and unclear claims processing. The bill was introduced by a bipartisan team, Marion Berry (D-AR), who is also a pharmacist, and Walter B. Jones (R-NC). The bill currently has 119 cosponsors in the House.
Specifically, the bill would require drug plans to pay pharmacists within 14 days for clean claims submitted electronically, and within 30 days for all paper claims. It would also require drug plans to notify pharmacists promptly if there were problems with submitted claims.
In addition, the bill sets minimum payment levels for dispensing generic drugs, as an incentive for pharmacists to offer the less expensive generics. It also would prohibit drug plans from issuing "co-branded" cards that can confuse beneficiaries about which pharmacies they can use.
The FAST legislation also builds on a provision in the 2003 Medicare law establishing guidelines for medication therapy management programs offered by drug plans. It calls for a 2-year pilot program that would enlist pharmacists to provide one-on-one medication counseling to their high-risk senior patients.
A companion bill has been introduced in the Senate, called the Pharmacists Access and Recognition in Medicare (PhARM) Act (S.2563). It was introduced by Thad Cochran (R-MS) and is cosponsored by Michael Enzi (R-WY) and Jim Talent (R-MO), along with 16 others. Although similar to the House bill, a key difference is that the PhARM Act would also require Part D plans to pay interest on claims that are not paid on time. Many pharmacy organizations are supporting these bills, including the NCPA, the APhA, and the National Association of Chain Drug Stores.
However, Part D plans argue that Congressional legislation requiring faster payments would force them to create entirely separate payment processing systems for Medicare claims. The Pharmaceutical Care Management Association, which represents many PBMs, has expressed opposition to the proposed legislation, arguing that pharmacies should be paid on an every-30-days schedule, consistent with how doctors and hospitals are paid under Medicare Parts A and B.
But pharmacists across the country undoubtedly will continue pushing for the passage of these bills, and pharmacy organizations are urging members to contact their legislators and tell them their own Part D stories. While continuing to support the federal government's attempts to expand access to prescription medications, pharmacy advocates argue that such health initiatives should not be carried out at the expense of frontline healthcare professionals.
Source...