FOR IMMEDIATE RELEASE: May 9, 2007
Schumer Reveals Medicare Part D Wiping Out Independent Pharmacies Across Upstate New York - Program Has Reduced Cash Flow For 90 Percent Of Independents
Bulky Bureaucracy and Rules Favoring Chains Drove More than 220 Independent New York Pharmacies Out of Business Last Year Alone
Today, U.S. Senator Charles E. Schumer revealed that the hundreds of independent and family-run pharmacies in New York are in danger of going out of business as a direct result of Medicare Part D. The Medicare prescription drug program, which began in January of 2006, is not reimbursing pharmacies quickly enough or at high enough levels for them to stay out of the red. Pharmacies often wait over a month for a reimbursement from the Medicare drug plans, and too often the reimbursement rates do not even come close to covering the ever-increasing cost of dispensing drugs to fill a Medicare beneficiary's prescription. With costs rising and reimbursements coming too late and not covering enough of the cost, many Upstate pharmacies have been forced to take out loans simply to keep their doors open.
"If we don't act fast, the mom-and-pop pharmacy will be a thing of the past," Schumer said. "Pharmacies should not have to choose between keeping their businesses afloat and serving Medicare beneficiaries. Mom-and-pop pharmacies are the backbones of many communities and shouldn't have to wait in line behind the big chains. The legislation that I am pushing will level the playing field to protect community pharmacies in upstate New York and across the country."
In December 2003, Congress passed The Medicare Prescription Drug, Improvement and Modernization Act of 2003, which created the Medicare drug program. As some analysts predicted when the Medicare drug program started in 2006, a number of independent pharmacies have had to close their doors because of slow payments, inadequate reimbursements, and the inability to retain customers who use the program to pay for their prescription medications.
Schumer said the same cumbersome bureaucracy that has confused millions of seniors in upstate New York and across the country has also stifled the small independent pharmacy. First and foremost, processing reimbursements for prescriptions takes a significant amount of time and advanced technology. While chain pharmacies have intricate on-line networks that streamline the process, independent pharmacies sometimes lack the resources to process reimbursements efficiently.
Medicare drug plans now tend to take about six weeks to reimburse a pharmacy for a dispensed drug. It used to take seven to 15 days. Some independent pharmacies have had to take out loans to compensate for the resulting cash-flow problems.
Schumer today said that all of these factors have caused a chilling effect for the independent pharmacy industry. According to the National Community Pharmacists Association, 90 percent of independent pharmacists report that their overall cash flow is worse now than before Part D began, and 33% said that they have considered closing their pharmacy as a result.
Independent and community pharmacies are also negatively affected because unlike large chains, they lack the purchasing power to buy drugs in bulk at a lower price, thus they are disproportionately hurt by the low and tardy reimbursements.
Despite the statewide shortage in pharmacists, pharmacy owners are finding themselves having to lay off pharmacists, technicians and delivery drivers, while also cutting back on hours. Many community pharmacies are no longer open on Sundays, and many more have cut back hours on Saturdays, closing at 6:00 p.m. as opposed to 9:00 p.m.
Schumer today released a new report showing that last year, 221 independent pharmacies closed their doors in New York State. These numbers represent a community, sole-proprietor, pharmacy that either went out of business or was acquired by a large chain. An additional 40 independent pharmacies are in the process of being bought out. Right now, according to the New York State Board of Pharmacy, there are only 477 community pharmacies left in Upstate New York.
The numbers below show how many independent pharmacies are left in each region of Upstate New York:
There are only 35 community pharmacies left in the Capital Region, three fewer than last year.
There are only 39 community pharmacies left in Central New York, four fewer than last year.
There are only 49 community pharmacies left in the Rochester-Finger Lakes region, five fewer than last year.
There are only 206 community pharmacies left in the Hudson Valley, 24 fewer than last year.
There are only 26 community pharmacies left in the North Country, two fewer than last year.
There are only 33 community pharmacies left in the Southern Tier, three fewer than last year.
There are only 89 community pharmacies left in Western New York, nine fewer than last year.
Upstate New York's independent pharmacies serve a higher proportion of Medicare beneficiaries than chain pharmacies, and they typically serve multi-county areas, often up to a 45 mile radius. When an independent pharmacy is forced to cut services such as delivery or reduce its hours, many customers—especially the elderly and disabled—are faced with few alternatives.
Additionally, due to the fact that most community pharmacies are located in poorer, rural areas, independent pharmacies typically have to fill a larger percentage of Medicare prescriptions than big chains do. This means that the vast majority of their transactions have to go through this time consuming and cost intensive Medicare reimbursement process. In addition, 92 percent of the business at independent pharmacies comes from prescription drugs, so they can not make up the losses in front-end store sales. Both of these factors results in the Medicare drug plan disproportionately impacting independent pharmacies.
To protect mom-and-pop pharmacies and level the playing field, Schumer today announced that he will push legislation that would help independent pharmacists bear the burden of the Medicare drug plan. This legislation would help independent pharmacists get their reimbursements faster by requiring prompt payment—within 14 days for claims submitted electronically, and 30 days for claims submitted otherwise—by prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PD Plans.) It also requires the payment of interest should the deadline not be met within the applicable number of days.
The bill, to be authored by Senator Max Baucus, will also require the Secretary of Health and Human Services to set reasonable dispensing fees for covered Medicare Part D drugs dispensed by participating pharmacies, and encourage the use of generic drugs by paying an increased dispensing fee for generics. The bill would also establish a 24-hour toll-free hotline for all pharmacists and pharmacy staff, dedicated to disseminating information with regard to Medicare prescription drug benefit information.
Last year, Senator Schumer was a co-sponsor of the legislation introduced by Senator Max Baucus (D-MT) titled the Pharmacy Access Improvement Act, which would have helped community pharmacies maintain their financial livelihood by mandating prompt and fair payments to pharmacies.