"As a result of extreme reimbursement cuts in the State of Washington Medicaid program, Walgreens (NYSE:WAG)(NASDAQ:WAG) today announced it will withdraw 44 of its pharmacies from the state's Medicaid program as of May 1."
I expect other pharmacies to follow Walgreens lead, putting Washington state in the unenviable position of having to backtrack and try again. Next time, perhaps the state will focus on generic drugs, the real source of potential savings for public programs.
On April 1, Washington state is planning to reduce the Medicaid pharmacy reimbursement for single source (brand) drugs from Average Wholesale Price (AWP) minus 14% to AWP minus 20%. See the state's official announcement from Feb 26, 2009.
Given the proposed date of enactment, you might be tempted to think that this is an April Fool's joke. AWP minus 20% would put Washington last among the 50 U.S. states for single source drug reimbursement based on CMS' December 2008 list of Medicaid reimbursement rates from around the country.
Granted, Medicaid is more generous than private payers -- see the data in Pharmacy Profits and Wal-Mart. But I'm still puzzled by the economic logic behind the state's move given the pricing dynamics in the pharmacy supply chain. Why attack pharmacy reimbursement for brand-name drugs?
Maybe the Department of Social & Health Services has an anti-Willie Sutton approach -- because brands are not where the money is.
In fact, The real money for pharmacies in Medicaid comes from generic (multiple source) drugs.
High generic pharmacy margins led directly to the Deficit Reduction Act of 2005 and the Average Manufacturer Price (AMP) fight. See the "Our Story So Far" section of my April 2008 article The AMP Saga Goes On and On and On.
The newest data show that Medicaid is still more generous for generics than Medicare Part D plans. A 2009 OIG study found that the average Part D and Medicaid pharmacy reimbursement amounts were similar for selected single-source drugs. However, Medicaid pharmacy reimbursement amounts typically exceeded the average Part D reimbursement amounts for selected multiple-source drugs. (Source: Comparing Pharmacy Reimbursement: Medicare Part D To Medicaid)
Stay tuned for more excitement as the twin demons of "health care reform" and "cost control" collide.
Sesame Street Explains the Bernie Madoff Scandal
OK, this video clip has absolutely nothing to do with the post above, but I think it is hilarious. YMMV.