Medicare Drug Benefit Affects Pharmacies
Two Wall Street Journal articles on Wednesday examined how the Medicare prescription drug benefit has affected retail pharmacy chains and independent pharmacies. Summaries appear below.
- "Getting an 'A' in Part D": The Journal on Wednesday examined how retail pharmacy chain Walgreen has "used the sheer volume of sales at its 5,200 drugstores to make up for Part D's lower dispensing fees" and has "used deft marketing to attract new customers and alliances with insurers to boost profit." As a result of the Medicare prescription drug benefit, Walgreen in the next few years expects to increase prescriptions dispensed to customers ages 65 and older by 30%, in large part because of an agreement with UnitedHealth Group, the largest provider of prescription drug plans. Under the agreement, Walgreen serves as pharmacy benefit manager for members of UnitedHealth prescription drug plans. In addition, because Medicare beneficiaries pay the same price under the prescription drug benefit regardless of the pharmacies they use, "Walgreen is no longer at a price disadvantage" with discount retail chains such as Wal-Mart and Costco Wholesale, "allowing the company to capitalize on the convenience of having so many locations," the Journal reports. Walgreen likely will add $6 billion in annual revenue over the next six or seven years and $70 million in annual pretax earnings as a result of the Medicare prescription drug benefit, William Blair analyst Mark Miller said (Merrick, Wall Street Journal, 6/21).
- "Lean Times in Rich Square": The Journal on Wednesday also examined how the Medicare prescription drug benefit has "been particularly hard" on independent pharmacies "in rural, low-income counties." According to the Journal, independent pharmacies have "seen their business dwindle" because more than six million beneficiaries eligible for both Medicare and Medicaid were transferred from Medicaid to Medicare prescription drug plans in January. Many independent pharmacies had "come to rely on higher reimbursements from Medicaid," and Medicaid provided more prompt reimbursements than Medicare prescription drug plans, the Journal reports. According to a March survey of 525 independent pharmacies conducted by the National Community Pharmacists Association, more than one-third of respondents said that the Medicare prescription drug benefit might force them to close. In response, independent pharmacies have called for legislation that would require "higher reimbursement rates for drugs and faster payments for pharmacies," but Congress has not taken action on the issue, the Journal reports (Zhang, Wall Street Journal, 6/21).