Cost-shifting among rural Montana independent community pharmacies

Downey, Kyle A., MS Pharmacy Administration, June 1999 Cost-Shifting Among Rural Montana Independent Community Pharmacies (65 pp.) Director: Timothy P. Stratton, Ph.D., R.Ph. Cost-shifting is a familiar term within the health care community and is commonly associated with hospitals. Many other health care providers, including pharmacists, have been affected by the practice. With the number of patients covered by third-party programs continuing to increase, cost-shifting is one of pharmacy’s many complex issues. The goal of the study was to determine if Montana Independent Retail Pharmacies engage in third-party induced cost-shifting. Costs of dispensing prescriptions by study pharmacies and drug costs were compared to the reimbursement rates for three different groups of prescription patients: cash customers, Montana Medicaid customers and Express Scripts customers (a third-party carrier for University of Montana employees). Data were collected from six Independent pharmacies throughout Montana. Information was collected on 100 consecutive private pay prescriptions for each of the stores Using pricing formulas supplied by the pharmacy managers, gross reimbursements were calculated for each of the same prescriptions as if they had been dispensed to Montana Medicaid or Express Scripts patients. A breakeven all-payer price was determined for each prescription consisting of the acquisition cost of each drug and the cost of dispensing the prescription. Cost-shifting occurs if a significant difference exists between the mean price for each group of prescriptions and if one or more payer group(s) are reimbursing below the all-payer price. All study pharmacies were located in rural areas with populations less than 25,000. A total of 596 prescriptions were analyzed. The average cost of dispensing a prescription among study pharmacies was determined to be $6.12 (+/$0.85SD). Third-party prices were calculated using formulas based on Average Wholesale Price (AWP), utilizing Maximum Acquisition Cost (MAC) for certain generic drugs. Combining prescriptions from the six stores (n=596), $0,90 per prescription was found to be shifted from Express Scripts (one of many third-party programs) to cash paying customers for the same prescription. Five cents of the charge for each cash prescription may be directly attributed to the Express Scripts program. As the number of patients being covered by third-party payers increases, the ability to cost-shift to cash paying patients will diminish. By accepting contracts below the cost of dispensing a prescription, independent pharmacies risk losing money by serving patients whose prescriptions are covered by third-party payers. To soften the burden, on average, the independent pharmacies in this study cost-shift to their private pay patients. TABLE OF CONTENTS Page LIST OF TABLES AND FIGURES ............................................................... v ACKNOWLEDGEMENTS..................................................................................... v