About that Carson City pharmacy story: the Affordable Care Act is not to blame

The following is a collaborative entry written by Joey Mattingly and Brent Reed and can be found on both of their blogs (here and here).

 

 

At first glance, the above tweet from the American Pharmacists Association (APhA) appears to lament the closing of Mike’s Pharmacy in Carson City, NV. On further inspection however, the article it links to – a report by Reno-based ABC affiliate KOLO-TV – is nothing more than a misinformed attempt to blame the Affordable Care Act (ACA) for the business’s demise. In an interview with KOLO reporter Colin Lygren, owner Mike Hautekeet cited poor reimbursement from insurance companies as his main reason for closing. The role of pharmacy benefits managers (PBMs) is specifically criticized, even though they have been contracting with insurance companies long before the ACA was enacted in 2010. The reporter never implicates the ACA himself, but he does fail to refute – or even investigate – Hautekeet’s claims. Below we explore some of the more plausible causes of the pharmacy’s reimbursement woes.

 

Pharmacy Reimbursement & Profitability

In 1996, Carroll et al studied pharmacy profitability and closure data in the Commonwealth of Virginia from 1989 through 1994 and concluded that private third-party reimbursement was the major reason for declining profits among community pharmacies.1 Later in 1999, Doucette et al explored data from 1994 and discovered that multiple market factors (e.g., percentage of elderly individuals in the community, percentage of the population living in a rural setting, high penetration rate by health maintenance organizations) influence the availability of community pharmacies and proportion of independently owned pharmacies.2

Notably the KOLO-TV article fails to mention the Medicare Prescription Drug, Improvement, and Modernization (MMA), which was signed into law by President Bush in 2003 and led to the implementation of prescription drug benefits for Medicare beneficiaries through Medicare Part D. Several researchers have investigated the potential impact of Medicare Part D on pharmacy reimbursement and the unintended consequences for independent community pharmacies in rural areas.3,4 In one economic model, Part D decreased the net income of the typical independent pharmacy by nearly 22% due to lower reimbursement rates.4

 

Reference Pricing in the United States

Price ceilings used to calculate reimbursement to pharmacies for dispensing a prescription were not invented by ACA. In fact, this practice has existed for more than 40 years, originating as a reference price system known as Maximum Allowable Cost (MAC).5 The MAC reimbursement model was specifically intended for Medicaid, although private insurance companies and PBMs also use it as a reference for capping reimbursement.5 In other words, Hautekeet is not wrong in saying that he may lose money when dispensing prescriptions – his blame is just misplaced.

 

A Word about Responsible Reporting and Social Media Use

As we point out above, the closure of Mike’s Pharmacy has little if anything to do with the ACA. Although the original report is deceiving, APhA is equally complicit by spreading this misinformation to its social media audiences on Twitter and Facebook. As a professional organization representing over 60,000 members with diverse political views, there are few topics upon which everyone is likely to agree. However, the organization has a corresponding responsibility to engage in open and honest discourse about the issues facing our profession, rather than unnecessarily galvanizing its membership. When we reached out to the organization for comment, we were told that APhA “[endeavored] to be provocative without being unreasonable.” While certainly provocative, we find that spreading misinformation is not only unreasonable but irresponsible.

 

References

  1. Carroll N V., Miederhoff P a., Waters LW. Profitability, third-party reimbursement, and access to community pharmacies. Clin Ther. 1996;18(4):703-715. doi:10.1016/S0149-2918(96)80221-9.
  2. Doucette WR, Brooks JM, Sorofman B a, Wong H. Market factors and the availability of community pharmacies. Clin Ther. 1999;21(7):1267-1279; discussion 1266. doi:10.1016/S0149-2918(00)80029-6.
  3. Fraher EP, Slifkin RT, Smith L, Randolph R, Rudolf M, Holmes GM. How might the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 affect the financial viability of rural pharmacies? An analysis of preimplementation of prescription volume and payment sources in rural and urban areas. J Rural Heal. 2003;21(2):114-121.
  4. Carroll N V. Estimating the impact of Medicare part D on the profitability of independent community pharmacies. J Manag Care Pharm. 2008;14(8):768-779. doi:2008(14)8: 768-779 [pii].
  5. Dickson M, Redwood H. Pharmaceutical Reference Prices: How do They Work in Practice ? Pharmacoeconomics. 1998;14(5):471-479.
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Joey
Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

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