Druggists may bolt Medicaid over cuts
Starting Thursday, he says he's through filling Medicaid prescriptions. Otherwise, he says, he would lose money on the top 45 drugs he sells.
"I might as well pull a $5 bill out of my pocket and hand it to people," Duskin said.
The state's plan to handle some of its budget problems by reducing Medicaid prescription payments is causing independents such as Duskin, who owns stores in Arlington, Marysville and Smokey Point, as well as the managers of several chains to think about leaving the Medicaid business in Washington state.
For nearly 500,000 poor, disabled and elderly residents, the decisions of these drugstore owners — and the state's insistence that it won't reconsider — may mean the difference between uninterrupted access to medicine and a difficult search for a participating pharmacy.
In some cases, the stores may just be threatening, though Rod Shafer, chief executive of the Washington State Pharmacy Association, predicts up to 25 percent of the state's 1,100 pharmacies will pull out.
And with the new, lower rates set to take effect Thursday, the state — which says it has been paying pharmacies more than private insurers have and now must spend more prudently — is providing rides to participating drug stores, starting a hotline to offer help, and hurrying to get mail-order service in place.
State Rep. Shay Schual-Berke, D-Normandy Park, calls the situation "a very scary game of chicken."
Schual-Berke, a physician, worries that the "most vulnerable among us" will suffer as pharmacists and the state fight this out, adding that Medicaid recipients in some areas are having trouble finding doctors.
"People who can't get prescriptions filled and get sick are going to wind up in emergency rooms, get care that's delayed and is more costly," she said. "That's part of the analysis the state hasn't done."
Driven by the need to find savings in the state budget, lawmakers this year ordered the Medical Assistance Administration to cut $21.7 million from the prescription-drug budget.
The state is projected to spend more than $1 billion on prescription drugs in the current biennium; a decade ago, the drug budget was $121 million.
Like many other states, Washington covers more poor people with Medicaid and offers them more services than is required by federal law.
"People in this state are very proud of the level of uninsured covered here," said Doug Porter, assistant secretary of the Medical Assistance Administration. "It's a very progressive state in this regard."
Porter said he has heard rhetoric and threats from pharmacists but believes most will take the new reimbursements. Providers often threaten to withdraw but rarely do, he said.
The cutbacks already have been delayed a month while a pharmacy coalition met with the state to offer budget-cutting alternatives. But Porter said none gave the savings needed: Some would take time to implement; others were already in the works or blocked by regulations.
"We have scoured every nook and cranny for good ideas," he said. "We have exhaustively looked at their proposals."
While the lower payments to pharmacies would affect almost a half-million Medicaid recipients, the change would not affect an additional 400,000 on Healthy Options, the state's Medicaid managed-care plan.
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Duskin, the owner of Arlington Pharmacy, says his number-crunching leads him to conclude that taking the state's payments would mean he would work for nothing. He predicts community pharmacies that take the state's deal will not survive.
"Some will die sooner, some will die later," Duskin said.
Duskin, whose son, Cory, works by his side as general manager, likely will be joined in the Medicaid pullout by a number of independents and small chains.
That worries Paula Wrede, a Kirkland woman receiving state aid for her medications.
Wrede, 55, lives in public housing and takes more than a dozen medications, some of them to stabilize her manic-depression. But she isn't just concerned about herself.
"You cannot go off these pills fast," she said. "Think of the older people on heart medicine, blood-pressure medicine.... They won't be able to get their medications; a lot of people could die, even in two weeks."
Many of the big chains, including Bartell Drug, Safeway, Fred Meyer and Rite Aid, say they haven't made a decision.
"We are taking a pencil to it and are very concerned," said Cherie Myers, Safeway's regional director of public and government affairs.
Cathy Polley, a National Association of Chain Drug Stores executive, said the cuts are among the nation's most drastic.
But pharmacists in other states are complaining, too, as lawmakers attempt to slash Medicaid costs. Last week, Massachusetts pharmacists called on the governor to veto cuts there, warning that many would be forced to stop serving Medicaid clients.
In Washington, both sides are armed with an array of spreadsheets and charts. Each says the other's numbers are wrong, incomplete or misleading.
Porter notes that the state's cuts — 3 percent for brand-name drugs and 44 percent cut for generics — are less than those suggested by the federal report.
Duskin, who gets 20 percent of his business from Medicaid, counters that those figures, when played out, amount to deeper cuts. "The legislators say, 'Why should (the pharmacists) get their underwear all bunched up over 3 percent?' " says Duskin, who has published his business's figures on the state pharmacy association Web site (www.wsparx.org).
"I've bared my soul," he said.
Take Prevacid, a common drug for gastric-reflux disease. Duskin says his cost is $108 for a 30-day supply. The average wholesale price the state uses as a benchmark is $132.59. With the current discount from the average wholesale price — 11 percent — plus a $4.14 dispensing fee, he'll receive a gross profit of $14.15. From that, he must subtract his average cost-per-prescription of labor and overhead of $11.60 — pretty typical for the business, he says — leaving him $2.55 for net profit.
With the cuts (a discount of 14 percent), though, he would get $10.17 gross profit. After he subtracts labor and overhead, Duskin says he would be left with a loss.
On average, for the top 45 medications sold, his gross profit under the new reimbursements would be $7.84 per prescription, while his labor costs alone would be $8 per prescription, he says.
"Do the math," he says. "I'm done right there."
Pharmacists claim the federal study's numbers are flawed. And, they say, filling prescriptions costs more for Medicaid recipients, many of whom are elderly, disabled or have language difficulties. Many need help understanding how to use medications or manage chronic illnesses.
In small towns, pharmacists say, they are front-line medical advisers, providing preventative care, immunizations and help in managing diseases such as diabetes and asthma, as well as providing services for nursing homes, clinics and hospitals.
Mail order, said Shafer, the pharmacy association CEO, won't work for many Medicaid clients.
But Porter said the state can't simply take the pharmacists' dire predictions "at face value" without good supporting data.
"My message to the industry has been: Do your own study, give me your results," Porter said. "The industry here in Washington has not been forthcoming with any competing data."
Some legislators say they wanted better information from both sides. "What bothers me," said Schual-Berke, "is there seems to be a lack of objective analysis to tell me where the truth lies. I'm being faced with a he-said, she-said.... "
But in Republic, a town of 1,000 in Ferry County, Rob and Patty Slagle, owners of the Republic Drug Store, have come to the same conclusion as Duskin.
The store in northeast Washington, in Rob's family since 1904, on Thursday will stop serving Medicaid fee-for-service patients, now 30 to 40 percent of their business.
"This is a difficult decision — we have not taken it lightly," Patty Slagle said.
Would they go broke if they accepted the state's reimbursement?
"Probably not," she said. But the cuts are the difference between profit and no profit, she says. And working that hard for no profit, she says, doesn't compute — not with three boys to support. "We're not doing it to be greedy."
The first customer the Slagles informed, a woman taking 13 medications ranging from heart and hypertension pills to psychoactive drugs, broke into tears, they said.
If the threatened boycott does take hold, Medicaid recipients in rural areas likely would have the hardest time finding a place to get their medications.
To fill prescriptions in Republic, Patty Slagle said, Medicaid patients will have to go about 80 miles roundtrip over a mountain pass — a trip the state says it will fund.
"What is that going to be — 30 or 40 cents a mile?" Patty asked. "Is that going to be financially justifiable? (Porter) better be saving a lot of money to take people up and over the mountains."
State officials have not determined how much it will cost to provide transportation and set up a mail-order drug program.
In Bellevue, C.J. Kahler, owner of U & I Pharmacy and president of the state pharmacy association, said he will have to stop providing free services, such as deliveries and filling insulin syringes for diabetic patients who are blind.
He will keep serving Medicaid patients for a month or two, then look hard at the numbers.
"We don't have the luxury of the large corporations to cook the books," he said. "We have to find ways to be in business."
Seattle Times staff reporter Luella N. Brien contributed to this report. Carol M. Ostrom can be reached at 206-464-2249 or costrom@seattletimes.com.