Walgreens draws another line in sand, opting out of Delaware Medicaid fills

DEERFIELD, Ill. Pushing back against a plan by Delaware Medicaid administrators to slash pharmacy reimbursements, Walgreens warned state budget-cutters Thursday the chain would stop filling Medicaid prescriptions in all of its 66 Happy Harry’s locations enrolled in Delaware Medicaid as of July 6.

Walgreens’ dramatic announcement comes after state negotiators refused to consider a suite of alternatives proposed by the company and by the National Association of Chain Drug Stores, company officials said. And — as has been the case in some other states — Walgreens’ ultimatum thrusts the chain into a front-line position in community pharmacy’s ongoing battle to maintain adequate prescription reimbursement rates, as states hit hard by the recession and budgetary shortfalls scramble for ways to cut spending.

Walgreens is the state’s largest pharmacy provider since it entered Delaware via its acquisition of Happy Harry’s in 2006. Thus, its announcement is sure to galvanize opposition to the cuts among all community pharmacies in the state.

Thanks in large part to its clout as a multi-store pharmacy operator; Walgreens was instrumental in a successful campaign to halt plans to drastically cut Medicaid pharmacy reimbursements in the state of Washington earlier this spring. If that pattern holds, the chain’s move could lead policymakers in Delaware to reconsider similar cuts in that state.

Delaware’s Medicaid cuts come under a new Medicaid reimbursement rule that took effect April 1, and is due to become part of the state’s new fiscal budget beginning July 1. The new reimbursement model gives pharmacies in the state one of the lowest payment rates in the country for brand name and generic medications, according to Walgreens.

“Delaware is arbitrarily and unilaterally reducing the price it will pay for brand name medications. This will severely impact the ability of pharmacies to fill Medicaid prescriptions in the state,” the company stated Thursday.

Kermit Crawford, Walgreens’ SVP of pharmacy, explained the move. “We have made the decision, after much thought and care, to end our involvement with the state Medicaid program. Quite simply, we can’t continue to participate in a program that, in some cases, pays us less than our cost to fill these prescriptions.

“By making it uneconomical for pharmacies to continue filling Medicaid prescriptions, the state’s new payments to pharmacies hurt the very patients that Medicaid is meant to serve,” Crawford asserted.

The state “could easily eliminate its Medicaid pharmacy budget gap simply by focusing on its generic dispensing rate at all pharmacies in the state,” he added, since each percentage point improvement in the generic dispensing rate would save the state approximately $1.2 million annually.In addition, Crawford noted that Walgreens, in conjunction with NACDS, had approached the state “with a number of sound alternative strategies and programs that could help Delaware fill its Medicaid budget gap.

“Many of these alternatives were rejected, despite their successes in other states. None of these methods would adversely impact patient care, unlike the reimbursement cut.”