Pharmacies Feeling Pressure of Reduced Medicaid Fees

In Rio Grande City, Rene Martinez’s Starr Pharmacy has one line for Medicaid patients and another for non-Medicaid patients.

On some days, most of his clients can be found waiting on the Medicaid line, a testament to the importance of that federal-state health insurance program in this poor city along the Texas-Mexico border — and to Martinez’s bottom line.

His store is one of a number of independent pharmacies in Texas that may have to lay off workers and cut services like free delivery to homebound patients because of looming lower dispensing fees. Beginning in March, a new managed-care plan goes into effect that reduces the amount pharmacies receive for filling Medicaid prescriptions.

The plan, approved by the Legislature earlier this year, is expected to save the state $100 million over the next two years.

Switching to managed Medicaid means pharmacy benefit managers will offer contracts to pharmacies with a lower dispensing fee that will replace the current $6.50 fee per prescription.

Dispensing fees make up about 10 percent of the total reimbursement pharmacies receive from Medicaid, depending on the cost of the medication.

“There are little things we do, like staff the pharmacy with two pharmacists at all times, that I don’t think I will be able to afford to do anymore,” said Martinez, who opened Starr Pharmacy in 2010. About 95 percent of his clients are on Medicaid, the joint state-federal insurance program for the disabled and poor children.

With the addition of managed care for pharmacies, Texas will fall below the national average for Medicaid dispensing fees, which hovers around $4.40, according to the Centers for Medicare and Medicaid Services. One pharmacy benefit manager, the Wisconsin-based Navitus Health Solutions, has announced it will offer a dispensing fee of $1.35, an 80 percent cut.

“I think pharmacies have the same concerns with managed care that doctors do,” said Stephanie Goodman, a spokeswoman for Texas’ Health and Human Services Commission. “But just as people will still have access to doctors, they will still see pharmacists.”

The dispute has sparked a lawsuit against the commission over the way the new managed-care plan was created.

Thomas M. Suehs, the head of the commission, said in a statement that the new fees would bring Medicaid in line with other insurers, like private insurance, which have a dispensing fee of $1.35 to $2 per prescription.

But Ray Perryman, a Texas economist, said the plan could cost the state economy $3.1 billion in lost jobs and reduced business to pharmacies. Perryman said it could also force the closing of 770 Texas pharmacies, mostly independent establishments and small chains.

Tammy Gray, a spokeswoman for Pharmacy Choice and Action Now, said ordering medications from suppliers would be harder for pharmacies, which will be working with less money.

Gray, who owns a pharmacy, said she also believes that pharmacy benefit managers will charge the state more for reimbursement claims than if the state were managing its own Medicaid program.

Pharmacy benefit managers and their lobbying have “highly influenced” the state, Gray said. “They’re convincing the state it will save them money,” she said. “How can you save money when you put a middleman in the middle?”

Goodman said that if pharmacy benefit managers set the rate too low, they will lose the contract. But some pharmacists say they had no choice but to accept the lower rates.

Martinez said he would hate to turn away patients because he would not take a specific pharmacy benefit manager.

“I feel like we’re forced to sign these reimbursement rates to continue to fill prescriptions and stay in business,” he said.