Impact of Medi-Cal Cuts on Patient Access
to Prescription Drugs

Webinar

Held on January 20, 2014

Click here to view the webinar handouts

Click here to view the Medi-Cal answers to webinar questions


Background

In 2011, California passed a 10% across-the-board cut to the reimbursement rates for Midi-Cal providers.  A court injunction has until now prevented the state from implementing these cuts. However, a reversal of lower courts’ decisions permits the state to begin implementing the cuts.  Some provider groups have already been cut and many others will start seeing these reductions in January 2014.  On top of the 10% cuts moving forward, Medi-Cal intends to collect the 10% cuts retroactively on all claims dating back to June 2011.

The 10% cuts will reduce patients’ access to covered services, particularly prescription drugs.  Pharmacies serving Medi-Cal beneficiaries will suffer significant monetary losses if they continue to participate in the Medi-Cal program, and many pharmacies will likely drop out or cap their Medi-Cal participation by refusing to take on new patients.  This will devastate the pharmacy network and many patients may find it difficult to obtain prescription drugs.  The additional one to two million beneficiaries that will enter the Medi-Cal program in 2014 will only make matters worse.

In the Medi-Cal fee for service system, the reimbursement to pharmacies for drugs is made up of two components: the drug product payment and a professional (dispensing) fee.  The drug product payment reimburses the pharmacy for the cost of the drug.  The payment amount is determined by a pricing benchmark based on the average cost of drugs, which is updated weekly.  The professional fee pays the pharmacy for all other costs associated with operating the pharmacy and dispensing the medication, from staff time and computer systems to rent and electricity bills.  The dispensing fee is based on studies of the average cost of dispensing, and is currently set in law at $7.25 per prescription filled.

Under the Medi-Cal cuts, pharmacies will be paid 10% less for drugs but the price that pharmacies pay to acquire those drugs will not change.  This means that pharmacies are losing money every time they fill a prescription—sometimes hundreds of dollars on a single prescription.  As a result, many pharmacies will not be able to afford serving Medi-Cal beneficiaries.

Elmore Pharmacy in Red Bluff, CA is one of the longest operating pharmacies in the state.  It has been serving the rural community for over 130 years.  This one pharmacy dispenses 90% of the county’s psychiatric medications.  In the event that Medi-Cal collects the 10% cuts retroactively, Elmore will “owe” the state nearly $750,000.  Nancy Dunckle, owner of the pharmacy, says she will be forced to drop Medi-Cal and could even have to close her doors altogether if hit with such a high debt.

No pharmacist wants to turn patients away, especially a vulnerable population such as Medi-Cal beneficiaries.  Some pharmacies may try to cut costs to shoulder the cuts by reducing their hours or laying off staff.  Many pharmacies have no option but to stop accepting Med-Cal or go out of business

Pharmacies shouldn’t be getting rich off of a cash-strapped program such as Medi-Cal, but they are businesses that have their own bills to pay and can’t afford to operate at a loss. 
 


Faculty


Jon Roth, CEO, CPhA
Brian Warren, VP Center for Advocacy, CPhA
John Cronin, PharmD, JD, Fredrickson, Mazeika & Grant, LLP

Click here to view the handouts

Click here to view the Medi-Cal answers to webinar questions