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September 5, 2002

Contact: Elizabeth Eddlemon
Antoinette Forbes
(202) 955-6200

Nursing Home Pharmacy Representatives Again Ask for Exemption from Proposed MassHealth Cuts
Regulators Urged to Prevent State’s Pharmaceutical Reimbursement Rates for Frail Elderly from Becoming Nation’s Lowest

BOSTON, MA – In public testimony today before the Massachusetts Division of Health Care Finance and Policy, six long-term care pharmacy representatives highlighted the special and unique services they provide to Massachusetts’ elderly and frail in seeking an exemption to a proposed cut in MassHealth reimbursement rates. The proposed cut would drop current pharmaceutical reimbursement rates by 12 percentage points. Earlier this month, Acting Governor Swift vetoed a legislative exemption that would have spared nursing-home pharmacies from a general cut in reimbursement to all pharmacies serving beneficiaries of MassHealth, the commonwealth’s Medicaid program for the poor and disabled.

“This decision will have a huge impact on the care received by the commonwealth’s most vulnerable citizens – the frail elderly and disabled,” said Stephen J. Northrup, executive director of the Long Term Care Pharmacy Alliance (LTCPA), which represents the major national nursing-home pharmacy operators. “The typical patient we serve is 80+ years old, takes an average of nine medications daily, and has an average of five diseases or conditions. Modern medicines have created fantastic opportunities to help these people. But cutting reimbursements across the board could leave thousands of them with severely reduced access to quality pharmacy care and service.”

Because nursing-home residents are older, sicker and in need of more medication than the general population, long-term care pharmacies must provide a level of service that goes beyond that provided by the typical retail drug store. Among these critical services are clinical consultations to monitor complex drug interactions, specialized packaging that ensures safe and accurate medication administration, and round-the-clock emergency delivery. Today in Massachusetts, 90 percent of prescriptions written for institutionalized patients are filled by long-term care pharmacies.

“The special needs of the frail elderly require specialized pharmacy services that go beyond what the typical retail pharmacy would provide to an ambulatory patient,” said George Cayer, a registered pharmacist and general manager of PharMerica’s Brockton facility. “The business of long-term care pharmacy exists to serve these special needs, but special needs come with special costs. We’ve already dramactically increased our efficiency and lowered costs because MassHealth reimbursement does not keep pace with wage inflation and ever-increasing costs of operation. Frankly, we’re not sure what more we can do.”

A study conducted by the accounting firm of BDO Seidman, LLP found that it costs the major national operators of nursing-home pharmacies, on average, approximately $11.37 to dispense a prescription. In contrast, the National Association of Chain Drug Stores (NACDS) estimated in 2000 that it costs a chain pharmacy, on average, $7.05 to dispense a prescription to a retail customer. The higher operating costs for nursing-home pharmacies are directly related to the intensive service needed to care for this medically complex and vulnerable patient population, such as:

  • Specialized packaging systems
  • Round-the-clock delivery
  • Intravenous medication
  • High acuity of care for the nursing-home patient

“Long-term care pharmacies are caught in the middle, between the prescribers and the drug manufacturers, said Albert Sivo of OmniCare. “We have little control over what drugs physicians prescribe, and no control over what prices drug manufacturers set. What we do control is the safe dispensing of drugs and the appropriate management of medication regimens – the services that the pending reimbursement cut would jeopardize without having any effect whatsoever on the rising costs of drugs.”

Long-term care pharmacies are heavily dependent on Medicaid revenues. Seventy percent of residents in Massachusetts nursing facilities are Medicaid beneficiaries. Long-term care providers – including long-term care pharmacies – rely on adequate Medicaid payments to sustain the specialized services they provide.

“This is an expensive state to do business in, “ said Stephen Penney, founder and owner of a small, successful Massachusetts-based long-term care pharmacy business. “The proposed reduction will rank Massachusetts reimbursement rates among the lowest in the country. Any reduction in the reimbursement rate and the implementation of a user fee will result in my pharmacy no longer being a financial viable company.”

“We believe that we have demonstrated time and again that the vital services provided by long-term care pharmacies to MassHealth beneficiaries should be exempted from the proposed reimbursement rate cuts, said Northrup. “We simply can’t afford any further cuts – and neither can thousands of elderly, frail and disabled Massachusetts residents who depend on us. We think it’s clear that the best policy would be to continue compensation at the current rate of wholesale acquisition cost (WAC) plus 10 percent.”

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NOTE: In advance of the hearing, DHCFP asked for acquisition-cost information on a list of 25 drugs. LTCPA believes this list is not a representative sample of drugs dispensed to MassHealth beneficiaries in the state, as it included several drugs that are rarely dispensed to residents of nursing homes. Instead, LTCPA-member pharmacies compiled a list of the top 25 drugs by number of prescriptions dispensed to MassHealth beneficiaries from May through July 2002. Based on these lists, LTCPA developed a weighted average of our gross profit per MassHealth prescription claim following a 12-percentage-point reimbursement reduction. Gross profit per claim is defined as WAC minus 2 percent, plus a $3.00 dispensing fee, minus actual acquisition cost for a 30-day supply of each particular drug.

Copies of this “real world” data – which was provided to DHCFP – are available to interested media.

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Long Term Care Pharmacy Alliance
1321 Duke Street   Alexandria, Virginia 22314   (877) 834-7762 

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