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California budget “threat to pharmacies”


The legislature of the US state of California has begun discussing Governor Arnold Schwarzenegger’s proposed budget. Mr Schwarzenegger has called for US$40m savings on the state Medi-Cal programme, realised in part from US Federal implementation of Average Manufacturer Price (AMP), a new method for calculating drug cost reimbursement.

Most cuts will arise from lower payments to pharmacies that cover prescriptions for Medi-Cal patients. California pharmacies have already taken a substantial financial hit with the implementation of the federal Medicare Part D programme, which provides prescription coverage to the elderly and disabled.

Many pharmacies serving the Medi-Cal population are already in trouble financially from these lower reimbursements, and the Governor’s additional cuts could imperil the fragile California pharmacy network, especially those pharmacies that take care of the poor and underserved.

David Breslow, CEO of United Pharmacists Network, states that in the Los Angeles area alone, about 44 out of 600 pharmacies have gone out of business.

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“A year into the programme, we’ve lost 5% of our independent community pharmacy members as a result of Medicare Part D,” said Mr Breslow. “These pharmacies were forced to close their doors due to reduced reimbursement and delayed payments. At a time when the state is considering expanding healthcare coverage to more Californians and as we look into the future where an increasing number of baby boomers are becoming reliant on medication therapies, this presents a serious problem in the ability to provide service to them.”

Prescriptions payments by Medi-Cal are made up by a drug reimbursement portion and a fee for dispensing. It is the drug cost reimbursement that is being cut by the federally mandated change in methodology for calculating this amount. In California the drug cost portion paid is already one of the lowest in the USA.

The California state legislature has the power to offset these reductions by increasing the dispensing fee portion that pharmacies are paid to cover a prescription. Currently, in California the dispensing fee paid is US$7.25 per prescription. A national study sponsored by the US National Community Pharmacists Association and National Association of Chain Drug Stores found that the average cost to dispense in California was actually US$13.08 per prescription.

Business Wire 4/7/2007


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