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Fees Take Toll on Mass. Pharmacies

By Lauren E. LeBon


Massachusetts pharmacies, including MIT Medical’s pharmacy, are feeling the pinch from the state legislature’s new measures to bail out the failing Medicaid program.

These measures include a pharmacy assessment fee, put into effect last Jan. 1, that adds a $1.30 fee to all drugs not covered by Medicaid, the state’s insurance program for the poor and elderly. State officials hope that the fee will raise $36 million for the state from Jan. 1 to June 2003, and that this revenue will gain matching funds from the federal government.

Since the establishment of this fee, chain pharmacies, such as CVS and Walgreen’s, have absorbed the cost, instead of passing the fee on to customers, after pressure from their customers and the state, but several independent pharmacies say that they cannot afford to absorb the cost.

MIT Medical: fee unaffordable

MIT Medical Chief Pharmacist Ratna Bhojani said that MIT Medical cannot absorb the fees.

“We cannot afford to absorb this fee,” Bhojani said. “We feel it is wrong that the government is imposing a fee on pharmacies.”

Currently, MIT Medical fills over 100,000 prescriptions a year, and does business comparable to that of a local chain pharmacy, considering the campus pharmacy has shorter business hours and is open only from Monday to Friday.

The Kendall Drug Co. in Kendall Square says it also does not have the resources to make up the difference.

“We have to charge the patients. That’s just how it is,” said a Kendall Drug Co. representative who asked not to be named. “We need to survive,” he said.

The representative added that Kendall Drug has probably lost business since January, when the state put the fee into effect.

There has been some talk in the legislature about lowering the fee from $1.30 to $0.65 in July, the start of the state’s new fiscal year.

As for the Medicaid co-payments, Massachusetts Governor Mitt Romney hopes to increase the co-pay for prescriptions from $2 to $3, according to an April 29 article in The Boston Globe. Before the increase, Medicaid patients paid a $0.50 copayment for prescriptions.

Pharmacists say this will be a financial blow since they must foot the bill if their customers cannot afford the copay.

The state pays pharmacies for the drugs that they sell to Medicaid patients, and this reimbursement is a source of revenue for pharmacies. The Medicaid reimbursement rates were lowered from 110 percent of the price of the drug to 106 percent of the value, according to the Globe report. State officials say that the reimbursements now reflect more accurately what the pharmacies actually pay for the drugs.

They predict the Medicaid rate cuts will save $26 million a year, according to a February Boston Herald report.

Representatives of the state’s Executive Office of Health and Human Resources were not available for comment yesterday.

Chain pharmacies absorbed fee

In February, local pharmacies came under criticism from the state after the pharmacies posted signs saying that the government was forcing them to increase prescription prices. CVS, Walgreens, and Brooks, among others, paid fines for as a result of putting up the signs.

Since then, pharmacies have covered the extra cost, and provided refunds in the millions of dollars for customers who had already paid the fee.

Still, pharmacists say that customers are paying for the fee indirectly.

“It’s definitely built in,” said Bhojani said. She said that pharmacies have to raise the prices of the drugs to compensate for losses caused by the fee, so the burden falls indirectly on the consumer.

Pharmacies file suit

Several pharmacies, including chains and independent stores, filed a lawsuit with the Suffolk Superior Court in late April to stop the fee, according to an April 24 article in the Globe.

CVS, Brooks Pharmacy, and Shaw’s Supermarket are among the plaintiffs. They argued in the lawsuit that the bill lacked necessary approvals, and expanded the definition of “pharmacy” to include hospital pharmacies, such as the one at MIT Medical.

Chain pharmacies, such as Walgreens, will lose on average $10,000 a month because of the fee, a Walgreens spokesman told the Herald in February. Walgreens did not join the suit.

The plaintiffs had hoped the suit would halt the first collection of the fee on May 1st, but last week the state secured the first installment of the fee payments. The Suffolk Superior Court will hear the case on May 12.

Christine R. Fry ’05 contributed to the reporting of this story.