Medicare report fuels drive for fast payment

ALEXANDRIA, Va. —A new, university-based study of Medicare Part D prescription payment cycles shows that community pharmacies are waiting 30 days or more to be paid for half the prescriptions they dispense under the drug benefit program.

The study, conducted by the University of Texas at Austin’s Center for Pharmacoeconomic Studies, found lengthy delays in pharmacy claims processing by many plans. Drawing from a database of 3 million Part D claims from 145 independent and 17 chain community pharmacies, researchers concluded that the median percentage of pharmacy claims that take more than 30 days to be paid from the time they were submitted was 50 percent. Worse, reimbursement for 17.1 percent of those claims took more than 60 days, the study found.

According to UT at Austin’s August 2007 report, “Length of Prescription Drug Payment Times by Medicare Part D Plans,” pharmacies commonly have to pay their suppliers every 15 days, yet the median percentage of claims that arrived in that time span was only 1.3 percent for independent pharmacies.

“When we looked at all the pharmacies in the study—the independents and the regional chains—we found that payments were received more than 30 days after [claims] adjudication for 44.1 percent of the 2006 Part D claims,” said Kristin Richards, a research associate for the Texas study center. “All the pharmacies received payments within 14 days for 0.7 percent of the claims— less than 1 percent.”

What’s more, Richards said, “It’s our understanding that most independent pharmacies are paid by check for Medicare Part D claims,” further slowing reimbursements.

Charles Sewell, senior vice president of government affairs for the National Community Pharmacists Association, pointed out that Medicare Part D now accounts for 34 percent of independents’ pharmacy business on average. “Unfortunately, since the inception of this program, community pharmacy has been plagued with low and slow reimbursements,” he told reporters during a Sept. 6 conference call to discuss the impact of the Part D program on independent pharmacies and the results of the University of Texas study.

“The low reimbursements have certainly caused us problems, but the slow reimbursements have been inexcusable,” Sewell argued. Since the launch of Part D in January 2006, he said, the prescription drug plans administering the drug benefit program have often stretched pharmacies’ claims payments to 30, 60 and even 90 days on a regular basis.

“Independent pharmacies are disproportionately affected because 93 percent of their business is prescriptions,” noted pharmacy owner and Texas Pharmacy Association president Jim Martin, who also spoke at the press briefing.

The result of the slow-pay cycle, said Sewell, has been “a serious erosion in the ranks of community pharmacy” since the inception of Part D. “In fact, 1,152 community pharmacies went out of business during the year 2006 … after five years of stability where we had no net loss of pharmacies. The only intervening variable was Part D with its low and slow reimbursements.”

Sewell and others at the press briefing had harsh words for the plans administering the drug benefit program for millions of Medicare beneficiaries. “They get paid up front, and they have a vested interest in sitting on that money as long as possible, and making interest on the float,” said the NCPA executive. “The oldest insurance ruse in the book is played out day in and day out—deny the claim first time through, even when it’s a clean claim—and just sit on the money as long as possible.

“Our pharmacies are all small businesses, and what’s happened is they’ve had to take out large lines of credit” to continue dispensing to Medicare patients, Sewell added. Indeed, NCPA research indicates that the average line of credit is roughly $70,000. “But many pharmacies that have a heavy concentration of senior citizens have had to take out lines of credit in the hundreds of thousands of dollars,” he asserted.

The result, said Sewell, is “significant losses in gross margin,” with an average drop of 22 percent in margins among independents since the advent of Part D, according to a University of Mississippi School of Pharmacy survey.

“When Part D was first introduced, the secretary of HHS [the Department of Health and Human Services] said our community pharmacists were the heroes making this program work,” Sewell noted. “Unfortunately, that’s not the way we’ve been treated.”

Joining Sewell on the conference call were two key members of Congress supporting fast-pay legislation for pharmacies. The two, Democratic Rep. Marion Berry of Arkansas and Rep. Walter Jones, R-N.C., introduced the Fair and Speedy Treatment of Medicare Prescription Drug Claims Act of 2007, which has garnered nearly 200 co-sponsors.

The bill is similar to Senate Bill 1954, the Pharmacy Access Improvement Act of 2007, introduced last month by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa. Both bills require complete and accurate Part D prescription drug claims submitted electronically be paid within 14 days, and paper claims within 30 days.

“There is absolutely no excuse for the way our pharmacies in this country have suffered because of the slow pay,” Jones asserted. “In North Carolina alone, we’ve had 62 pharmacies close their doors,” Berry added

Jones said he would join Berry in putting pressure on the Health Subcommittee of the House Ways and Means Committee and the subcommittee chairman, Democratic Rep. Pete Stark of California, to move the FAST bill to the floor of the House for a vote, and to reconcile both pieces of legislation in the Senate.

“We know how to fix this…and I’m frustrated that it’s taken us this long. It’s just been hard to get the leadership focused on it,” agreed Berry, who practiced pharmacy before his election to Congress. He predicted the bill could pass the House and Senate this year, but warned that any bill would have a tougher time getting past the Bush administration.

Nevertheless, said Jones, “If [the Democrats] push on their side, I can assure you we can rally the American people. This isn’t just about community pharmacists. This is about the ability of the American people to have a pharmacist in their town or region they can see.”

Both lawmakers said the University of Texas study would bolster support for prompt-pay legislation, both within Congress and in the public debate about Part D.