Anguish at the Drug Counter

Three months after the launch of Medicare’s new drug benefit for seniors, the program is turning into a disaster for pharmacists such as Jose Marco.

The 61-year-old owner of Marco’s Farmacia in East Los Angeles says he is losing money on almost every prescription he fills under the program, which allows Medicare recipients to choose from an array of commercial drug discount plans.

Overall, “I’m barely breaking even,” said Marco, who opened his business in 1979. “It hurts.”

Marco is not alone. Pharmacists from rural North Carolina to the Bay Area are complaining that some Medicare plans are reimbursing them at less than cost on some prescriptions they fill for seniors. They also say some Medicare drug plans are slow to make payments, adding to their cash-flow problems and forcing some to borrow money or lay off workers.

Particularly hard hit are independent operators that serve low-income communities. Unless there are changes, some may close, said Crystal Wright, a spokeswoman for the Assn. of Community Pharmacists Congressional Network, a trade group that represents 15,000 independent pharmacists.

“They are having to choose between continuing to serve their patients now and keeping their doors open,” Wright said.

Medicare officials say the plan is designed to drive down prices by giving health plans clout to negotiate what they pay pharmacies. Pharmacies are free to bargain for a better deal -- or walk away, said Larry Kocot, a senior advisor for the Centers for Medicare and Medicaid Services, the federal agency that runs the program.

“This program is based on a competitive marketplace, and negotiation is really a function of a competitive marketplace,” Kocot said.

Not every drugstore is hurting. Chains such as Walgreen Co. say they can tolerate the slimmer margins and hope to make up the difference with an expected volume increase as more seniors sign up for the Medicare benefit. Big operators also are better able to weather such changes because a third of their sales are outside the pharmacy -- from products such as shampoo, diapers and beach balls.

Like many independents, however, Marco’s Whittier Boulevard store relies heavily on the prescription drug business of Medicare and Medi-Cal enrollees.

Marco said he would keep going as long as he could -- and would continue waiving co-payments for needy patients he knew would go without medications if he charged them.

“If I do push it, where am I?” he said. “I’m not going to be very much of a pharmacist. If I’m going to go belly up, then I’m going to go belly up feeling great about myself.”

At least one small drugstore in California -- Baneth’s Pharmacy in Menlo Park -- has stopped filling prescriptions for some Medicare drug benefit enrollees, along with thousands of customers on other programs run by Health Plan of San Mateo, a nonprofit health plan for low-income residents.

“There is no alternative,” said owner Richard Burge, who said he had to lay off four of his 16 employees.

“I have to reach into my wallet with every prescription we are filling.”

Maya Altman, interim executive director of the health plan, said she knew that pharmacies were hurting but that there was little she could do. The quasi-government agency set up to offer medical coverage to the poor is itself struggling to break even, she said.

Burge and other pharmacy operators believe that the Medicare drug plan was set up to squeeze drugstores for the savings needed to offer drug benefits to 43 million seniors. They believe that the pharmaceutical, insurance and pharmacy benefit management companies involved in the program aren’t sharing the pain.

Others contend that pharmacies have had it too good for too long. Mark Merritt, president of the Pharmaceutical Care Management Assn., said the Medicare drug program gave seniors buying power they didn’t have on their own.

Merritt’s group represents pharmacy benefit managers -- companies hired by insurers to, among other things, negotiate payment contracts with pharmacies. Some offer their own Medicare drug plans.

“One of the reasons that the private-market model was brought into Medicare Part D,” Merritt said, “was to wring out some of these inefficiencies so there could be a drug benefit that’s affordable to seniors and taxpayers alike.”