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Background:  The state of California is currently in a serious economic downturn.  This has contributed to an already growing budget deficit.  This deficit is currently estimated to be over $16 billion dollars for fiscal year 08 – 09.  The worsening credit rating of the state along with the worsening economic picture caused the legislature to take unprecedented action in passing the Governor’s proposed 10% budget cut across the board in state spending.  They did this in record time with nearly no discussion or opposition.  The Governor signed this into law just days later.  The cut applies to provider fees for the Medi-Cal program and will save the state about $540 million, and $172 million of that is in pharmacy payments alone.

The only way to stop implementation of these cuts is repeal of the law or injunction by the courts.

Impact on Community Pharmacy:  The 10% reduction in pharmacy payments will be devastating to many pharmacies, especially independents that take more Medi-Cal and may be operating on narrower margins.  It will cause most brand name drugs to be dispensed below cost and in some cases significantly below.  Many independents may go out of business and the chains cannot pick up the patient load they leave behind.  This destruction of the pharmacy network in California will seriously cripple any future health care reform or expansion efforts and damage the system of drug distribution for current consumers.

This outcome will disproportionately impact the chronically ill (AIDS/HIV, Hepatitis, Diabetics, Mentally Ill, etc.) and older patients.  They may find their pharmacy support gone.  Additionally, even patients not on Medi-Cal who use these stores would be left out if the store closes down.

This may be the worst issue yet for pharmacy to face in many, many years.

Political Climate:  There is considerable speculation about this issue.  Many believe that this was both to save the states credit rating in the short run and was also intended to push republicans toward accepting revenue enhancements.  It is widely believed that the Democrats generally do not want to do the cuts this way.  There is some thought that along with just a handful of Republicans they could craft a solution (along the lines put forth by Elizabeth Hill, Legislative Analyst) that the Governor would sign.  This solution would not call for these cuts in this way.  Others around the Capitol are less hopeful and think a solution will only be provided to those who make a very good and compelling case.  One at a time.  Below you will find the strategies that CPhA is proposing to undertake. 

CPhA Strategies:

1. Lawsuit/ Legal Action – We have one proposal already in hand of a proposed suit by an attorney know to many of our members.  We also have talked to the firm who brought the suit against CMS on behalf of NCPA and NACDS regarding AMP.  They have some very promising ideas and we are moving forward.
2.  Legislative Relief – We already have a spot bill introduced which could be amended to require the repeal of the cut for pharmacy.  We do not yet have the appropriate language crafted that might accomplish this that we think could be passed and signed into law.
3. PR Campaign – This will be imperative for us to conduct in support of our case for pharmacy.  The Chains are partnering with Independents on this effort.  It will allow us to emphasize the value of pharmacy as a critical endangered resource in healthcare and will support all our other strategies.
4. Grass Roots Legislative Effort – This will be conducted in individual legislators’ districts.  We will seek to mobilize the voters there, including pharmacists and the patient groups which will be affected.
5. Coalition Mobilization – We will arm and activate our patient advocate partners to help us tell this story and to protect the patients.  We have already begun to talk with many of them and they have already stepped forward where needed.
6. Cost of Dispensing Study – The State of California released their CoD on March 28, 2008. In order to have current number, CPhA will undertake its own study. This will be conducted by Michael Rupp of MidWestern University.  This study could also be used with other third party payers.  This effort is already underway.
7. Heavy lobbying with all governmental decision-makers – Both Kathy Lynch, VP of Government Affairs and Lynn Rolston, CEO, along with Neilsen Merksamer and the rest of our lobbying partners will be making countless meetings with the people who can help change this.  We have already begun, we are telling the story on behalf of pharmacy and the patients they serve.

CPhA has allocated SIGINIFICANT funding for this effort but we need your help as well to correct this situation.

CONTRIBUTE TODAY AND SUPPORT YOUR PROFESSION AND COMMUNITY PHARMACY!