Pharmacies Braced for Cuts to Their Medi-Cal Payments

(Getty Images)

(Getty Images)

Pharmacies across the state are bracing for a blow to their revenues. Starting Friday, Medi-Cal –the state’s health coverage for low-income patients — will start paying 10 percent less for filling certain prescriptions. Though the number of drugs affected is less than originally outlined, pharmacists are still worried.

Many of them say there is a misconception that they make loads of money selling drugs. But after they pay pharmaceutical companies for the medications they stock, there’s little profit left, they say. An additional cut could put them in the red on some drugs.

“The margin in drug products is roughly 2 to 4 percent,” says Jon Roth, CEO of the California Pharmacists’ Association. “If you’re looking at a 10 percent reduction, you’re immediately upside down and dispensing medication at a loss.”

Some pharmacies said they would simply stop carrying certain drugs rather than take the hit. Advocates had worried that patients wouldn’t be able to get expensive medications for cancer, HIV, or mental health conditions.

So the state stepped in and created a list of 2,600 drugs that are now exempt from the cuts – about 60 percent of all drugs reimbursed in a given month. However, the state still plans to “clawback” — or retroactively collect — payments on the remaining drugs dating back to June 2011, when the cuts were first signed into law.

Roth says the exemptions make the cuts “much more palatable.”

But some small-town pharmacies say they will still be hurt by the remaining cuts and the clawbacks.

“It’s getting tighter and tighter,” says Nancy Dunckel, the owner of the Elmore Pharmacy in Red Bluff, 130 miles north of Sacramento.

She says independent shops like hers can’t offset losses the way large chain pharmacies like Walmart can.

“The pharmacy department is usually a loss leader for them. So they can survive on out-front items, whereas a pharmacy like mine can’t,” she says.

She’s afraid her employees will be the ones to suffer.

“I’ve been able to carry health (insurance) for them, they have 401(k)s and retirement plans, which most small businesses can’t,” she says. “And I’m not sure if they’re going to be able to carry that on.”

Dunckel has grown so frustrated with all the cuts and business changes, she’s decided to sell her pharmacy and move to Oregon.

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  • iamLittleone

    Believe me, I am very much in favor of Medi-Cal, healthcare reform and other programs for lower income people. In fact, I am a very left, single-payer supporter. That being said, the exemption list is very generous. For goodness sake, there are a dozen forms of valium on the list alone as well as pain relief and laxatives that you can buy over the counter! For most people, if there is a drug that one needs, I am sure that the patient and their doctor can find a suitable one on this list. Bringing healthcare costs down is going to take a little effort from EVERYONE!