Convoluted Medicare Part D taking its toll on Central Valley pharmacies

By Craig Anderson

Medicare part D stumbled from the halls of Congress in the spring of 2006, wreaking havoc with pharmacies and their customers and the regulatory mayhem continues today.

Medicare’s drug plans are subsidized by the federal government and offered through private insurers. Medicare part D is designed to provide prescription drug coverage via an optional plan where the insured pays a monthly premium with Medicare picking up much of the prescription tab.

Medicare part D is a supplementary plan intended to protect seniors from increasing and unexpected drug costs and is available to anyone eligible for Medicare part A and/or part B.
And whenever the government is responsible for payment the system slows to a crawl, as Harold Reich, owner of Harold K. Reich Pharmacy in Tracy discovered during the implementation of Medicare part D in 2006.

“The plan wasn’t ready but we had to implement it anyway,” Mr. Reich said. “We were filling prescriptions without reimbursement and we had to carry Medicare D customers for five months.”

Not being paid in a timely manner by the government and insurance companies may be old hat to government contractors but independent retail pharmacies and pharmacies in general have taken a financial beating for nearly three years.

“I have between $700,000 and $800,000 tied up in Medicare part D accounts receivable,” said Charlie Green, owner of Green Brothers Pharmacy in Stockton. He pointed out that part D is “extremely complicated at every level” and the first challenge came when waves of seniors needing the plan came to him, and other pharmacies, seeking advice.

“There are about 18 to 20 health insurance companies in San Joaquin County with 70 to 80 Medicare part D plans in San Joaquin County alone,” said Mr. Green. “We helped our customers go to websites to find programs and formularies, which show which drugs are covered.”

A troubling aspect about every plan is that each contains a “donut hole”, a time when insurance companies no longer cover their client’s prescriptions, Mr. Green said.

When an insured person’s co-pay reaches $2,200 they’ve hit the “donut hole” or, perhaps more accurately, the “black hole” where their insurance coverage stops; while in the hole they pay full price and when the payments reach the $5,000 mark, the insurance begins to pay again.

“A Medicare part D participant can have a policy where the insurance company pays during that ‘hole’ phase but the premium is much higher,” explained Mr. Green.

He said a very real problem when dealing with hundreds of customers qualified for the program was, and remains, that many Medicare patients are not computer literate and with the added challenge of many not being physically well or mentally alert, choosing from the dozens of programs often became a difficult process.

“It was a real struggle for two years after that program was dumped on us,” Reich said, adding that he and his staff “took it upon ourselves to help people find a plan that was best for them.”

Fortunately, Reich’s bank came to the rescue with a line of credit which was used to pay bills which Mr. Reich said allowed his pharmacy to stay in business.

“Our volume is up 25 percent but gross revenues are down 25 percent due to that program,” he said. “Our biggest struggle is to get fair reimbursement for prescriptions from insurance companies.” That is important to Mr. Reich because 80 to 90 percent of his business is done through insurance companies.
Andrew Magnasco, pharmacist and owner of Linden Pharmacy is of a like opinion, noting, “Medicare part D’s slow pay has made cash flow and margins terrible for pharmacies and its policies are driving independent pharmacies out of business. Under this program I have three times the paperwork and one-half the revenue.”

Since the advent of Medicare plan D he councils about 16 people daily on insurance issues associated with the plan, with medication problems a distant second and although this requires significant time, Mr. Magnasco doesn’t mind. “I’ve known most of my patients and other customers for years and this is just something independent pharmacists will continue to do.”

What troubles Mr. Magnasco and other pharmacists is losing the connection to their patients and the potential substitution of volume for customer service. He said part D forces pharmacies to do more volume, thereby reducing pharmacist’s ability to know their customers and thus avoid errors made during an assembly line drug fulfillment process.

As an independent he can adjust to maintain his customer relationships but that’s becoming a real problem with pharmacists in big chains, Mr. Magnasco said. “The burnout rate of pharmacist in the big chains is very high. They are discouraged from talking to patients because it interferes with the volume.”

Mr. Green said the extremely complicated Medicare part D was not thought out by Congress and it’s been passed off to the private sector to implement it.

And then there is the matter of details in Medicare Coverage as described by the government: “A part D covered drug is available only by prescription, approved by the Food and Drug Administration (FDA) (or is a drug described under section 1927 (k)(2)(A)(ii) or (iii) of the Act…and used for a medically accepted indication (as defined in section 1927 (k) (6) of the Act.” This government babble fills 47 pages.

A troubling requirement of Medicare plan D is that pharmacists assisting clients in the process of choosing a plan cannot, under law, recommend a particular plan. However, insurance company representatives may recommend whichever plan they like.

The insurance companies also send spies as part D applicants – known in the trade as the Insurance Gestapo – to pharmacies to ensure pharmacists aren’t recommending plans to their customers, said Mr. Magnasco. “This prevents us from recommending the best plan to the insured, whereas the insurance companies aren’t restricted whatsoever.”

Medicare part D is taking its toll on the pharmacy industry, said Mr. Green. “18,000 pharmacies have closed nationwide since 2006 due to D. And when its costs are added to the usual increases in fuel, energy and other items, it’s easy to understand how this could happen.”

The battle for pharmacists is making Medicare part D work, keeping costs down and still being able to take care of patients. “I love what I do and want to continue and do it better and not be beaten down by regulations,” Mr. Green said, echoing what others say about the future of independent pharmacies.