Findings from Virginia Commonwealth University advance knowledge in medicare and medicaid
December 15th, 2008
2008 DEC 15 -- According to recent research published in the Journal of Managed Care Pharmacy, "Medicare Part D provides insurance coverage for prescription drugs to elderly and disabled consumers. Part D accounted for 24% of prescriptions dispensed by independent pharmacies in the first year of the program (2006)."
"To date, the impact of Part D on independent pharmacies has been explored only in small, qualitative, or non-peer-reviewed studies. To develop preliminary estimates of the impact of Part D on independent pharmacies' profitability. A financial model was built to examine the impact of Part D on pharmacy profitability. A key input value was the gross margin percentage for Part D; the midpoint of estimates reported in the literature was used as the base-case input value. The remaining model inputs were derived from 2 non-peer-reviewed published sources: (a) the National Community Pharmacist Association (NCPA)'s survey of independent pharmacies, which provided financial data for the year prior to Part D implementation (2005); and (b) IMS Health national market research data, which provided information about changes in prescription drug utilization from 2005 to 2006. Model estimates represented a ''typical'' independent pharmacy, defined using mean values for financial measures in 2005 as reported by NCPA. The model examined the impact of Part D on the proportion of prescriptions reimbursed by other sources (private third-party insurance, Medicaid, and cash payments by patients); pharmacies' overall prescription gross margin; the number of Part D-induced prescriptions; the number of prescriptions lost to mail-order pharmacies; and net income before taxes. Key values and assumptions were subjected to one-way and probabilistic sensitivity analyses. The model indicated that implementation of Part D resulted in a mean (SD) 22% (4%) decrease in net income before taxes. This change was primarily the result of an absolute 0.7% decline in the gross margin for all prescriptions. The lower overall gross margin resulted from lower reimbursement on Part D prescriptions. In the typical independent community pharmacy, Part D induced an increase in utilization of an estimated 427 prescriptions but 229 prescriptions were lost to mail-order pharmacies. The results were most sensitive to Part D reimbursement rates. Even under the most optimistic assumptions, Part D decreased net income. However, even under the least favorable assumptions, the typical independent pharmacy remained profitable. Part D reduced the profitability of the typical independent pharmacy by an estimated mean (SD) 22% (4%) in 2006," wrote N.V. Carroll and colleagues, Virginia Commonwealth University.
The researchers concluded: "This reduction resulted primarily from the lower Part D reimbursement rates."
Carroll and colleagues published their study in the Journal of Managed Care Pharmacy (Estimating the Impact of Medicare Part D on the Profitability of Independent Community Pharmacies. Journal of Managed Care Pharmacy, 2008;14(8):768-779).
For additional information, contact N.V. Carroll, Virginia Commonwealth University, School Pharmacy, 410 North, 12th St., Box 980533, Richmond, VA 23298, USA.
The publisher's contact information for the Journal of Managed Care Pharmacy is: Acad Managed Care Pharmacy, 100 N Pitt St., 400, Alexandria, VA 22314-3134, USA.
Keywords: United States, Box, Medicare and Medicaid, Drug Development, Health Policy, Managed Care, Medicare, Pharmaceuticals, Therapy, Treatment, Virginia Commonwealth University.
This article was prepared by Biotech Business Week editors from staff and other reports. Copyright 2008, Biotech Business Week via NewsRx.com.
