Retailers Consider Bailing Out of Medicaid Programs

NEW YORK - No. 1 drug chain Walgreen Co. on Thursday became the latest retailer to say it may have to pull out of a state Medicaid program because of cutbacks in reimbursements, Reuters reports.

Walgreen is considering bailing out of the Medicaid program in Washington State, while rival CVS Corp. on Wednesday pulled out of the Massachusetts Medicaid program. Washington State is the second state behind Massachusetts that drug store operators said had drastically reduced Medicaid reimbursements for prescription drugs to meet budget constraints.

A spokeswoman for Deerfield, Ill.-based Walgreen told Reuters that pulling out of the program to fill prescriptions for Medicaid patients was one of the options which the company could be forced to take to offset the impact of lower Medicaid patient contributions there. She said no final decision had yet been taken. Another option would be to reduce store hours, she added.

Walgreen's announcement follows a Wednesday decision by U.S No. 2 drugstore chain CVS to stop filling prescriptions from Medicaid patients at its Massachusetts stores. Industry insiders say Massachusetts now has the lowest Medicaid refund rates in the country, followed by Washington State, which is estimated to have about 500,000 Medicaid recipients.

Walgreen has given Massachusetts, where it has 90 stores, until the end of this month to work out a better deal, saying that it would have to consider pulling out of the Medicaid plan there if the state does not reconsider its stance.

Many U.S. states are slashing Medicaid costs by lowering refunds to pharmacies, which in turn are confronted by rising dispensing costs as prescription drug use in the U.S. soars.

Spending on prescriptions is the single biggest driver of Medicaid costs, projected to rise at a 12.7 percent rate annually, according to the Centers for Medicare and Medicaid Services. Total state Medicaid-related budget shortfalls for fiscal 2001 and fiscal 2002 are expected to reach $7.1 billion.

Even supermarket chains, including Albertson's Inc., said the reduced rates would hurt their business. "The (lawmakers) cannot continue to count on community pharmacies to pay for state budget deficits," Etherine Cousins, a spokeswoman for Boise, Idaho-based Albertson's said.

"Our pharmacies may be the only access (that these people) have to a medical professional within their community," she told Reuters.

Rite Aid Corp., the third-largest U.S. drug store chain, said it was also evaluating its response to the Washington State Medicaid cuts. "The drug stores are caught in the middle. We are the ones be asked to make up for the budget deficits," Sarah Datz, a spokeswoman for Camp Hill, Pa.-based Rite Aid said.

She added that the company's proposals to Washington State -- including asking the public to use more generic drugs and seeking more rebates from drug manufacturers -- had so far gone unheeded. About 41 states are estimated to have plans in place to cut spending increases for Medicaid this year, according to Reuters.
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