Monday, February 02, 2009

Pharmacy and the Stimulus Bill

Should you worry about the fact that economic crisis is being used as a way to nationalize health care?

I think that’s a yes!

Last week, the U.S. House of Representative passed H.R.1 American Recovery and Reinvestment Act of 2009, the $819 billion so-called “stimulus” bill. As Peggy Noonan opined in Saturday’s Wall Street Journal, it’s “a big, messy, largely off-point and philosophically chaotic piece of legislation.”

There’s some good news for the pharmacy industry buried in Section 3003 (“Temporary Optional Medicaid Coverage For The Unemployed”) of this pork-laden monstrosity.

Most notably, Medicaid is now available to Americans (and their families) who lost their jobs anytime since July 2008 and anyone who will lose their jobs by January 2011. States are prevented from imposing income limits on beneficiaries in most cases. I guess that the states won’t mind because the Federal government will reimburse states for the more than 1 millions new enrollees.

I don’t know whether this unexpected Medicaid expansion will survive into the final version of the stimulus bill. But if it does, it will help further insulate pharmacies and the pharmaceutical industry from the downturn. Medicaid margins are relatively robust compared to private insurance. (See Pharmacy Profits and Wal-Mart.) Plus, the uninsured have much more trouble paying for drugs. If losing their jobs also meant losing insurance (and they can’t or didn’t use COBRA), then Medicaid provides a cushion.

On the plus side, we have free Doritos in the office today.


  1. Eric AxelrodFebruary 02, 2009

    You neglected to mention that people 55 years and older whom lose their job in this timeframe are eligible for Medicaid under the same provision... except they get to keep Medicaid coverage for up to 10 years (until they become Medicare eligible). The cost of this extended timeframe, by the way, has not been calculated in the estimated cost of the bill beyond 2 years of inception.

    What a blatant attempt to make the general population dependent on health insurance (and I use the term loosely) provided by the federal government. I hope this isn't an indication of thing to come.

  2. "Pharmacy and the Stimulus Bill" - sounds like an episode of "The Love Boat". I hope Captain Stubing is steering the ship?

  3. I think you are mistaken regarding margins for pharmaceutical sales in Medicaid. At my company (a major pharma), Medicaid margins are substantially lower than margins from sales to commercial plans. This is due to the combination of base rebate of 15.1% plus CPI adjustments plus best price adjustments plus supplemental rebates.

  4. Re: Medicaid margins

    My post refers to the gross margins of independent pharmacies for dispensing prescriptions to Medicaid recipients.

    I am *not* referring to margins earned by a drug manufacturer/labeler. I assume you are a manufacturer given your comments about rebates, best price, etc.

    Sorry if that was not clear.


  5. Healthcare is not a "free market". When we break an arm we don't shop around for "the best price" to fix it.

    We need to do something, the system is very broken. I remember your coment to retail pharmacy "get big, get lean, or get out". If I need to get "lean" why do the large PBM's get to make so much money off of work I do? I watch as the PBM gets to bill self-insured health plans five times what they reimburse me. (they billed the health plan 50k, yet my reimbursement was 10k on one generic drug)


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