OIG report confirms dangerously thin margins for community pharmacy

Jan 15 2008

The Office of the Inspector General of the Department of Health and Human Services released a "Review of the Relationship Between Medicare Part D Payments to Local, Community Pharmacies and the Pharmacies' Drug Acquisition Costs."

In response Bruce Roberts, RPh, executive vice president and CEO of the National Community Pharmacists Association (NCPA), issued the following statement:

"While the report acknowledges that it does not account for all costs of dispensing prescriptions, we applaud the work of the OIG in confirming the financial difficulties Part D has placed on community pharmacy. Its estimate that local community pharmacies received an average Part D dispensing fee of $2.27 per prescription reinforces our position that community pharmacies are not adequately reimbursed for the costs of dispensing drugs. When you also consider the slow rate of reimbursement, as evidenced by a recent University of Texas study, pharmacists may be forced to close their doors, or stop participating in these government programs and patient access to the medicines they need will be seriously threatened.”

In the report, the OIG estimates that the difference between Part D payments and drug acquisition costs is $9.13 per prescription including wholesaler rebates, which are not received by every pharmacy. With the $2.27 dispensing fee, the compensation to pharmacies then averages $11.40 per prescription. The recent study by the accounting firm Grant Thornton found that the average cost to dispense a prescription drug is $10.50, yielding 90 cents, on average, per Medicare prescription. With an average prescription price of $68.26, this nets a mere 1.3% net profit margin.

The National Community Pharmacists Association, founded in 1898, represents the nation’s community pharmacists, including the owners of more than 23,000 pharmacies. The nation’s independent pharmacies, independent pharmacy franchises, and independent chains dispense nearly half of the nation's retail prescription medicines.