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2003-12-17 -- Pharmacies, state battle over Medi-Cal cutbacks

Lawsuits, threats of pull-out follow proposal to trim reimbursements

San Francisco Chronicle, Wednesday, December 17, 2003

Victoria Colliver, Chronicle Staff Writer

URL: sfgate.com/article.cgi?file=/c/a/2003/12/17/BUG163OJG41.DTL

Pharmacists across California are balking at proposed cuts in the
state's Medi-Cal program, which subsidizes drugs for poor citizens.

Walgreens Co., the nation's largest drugstore chain, is using its size
to try to influence lawmakers to reconsider the 5 percent reduction in
reimbursements paid to pharmacies, which the firm says will cut into
its already low 2 percent profit margin.

"If that proposal were to take effect, the Medi-Cal program would have
one of the worst reimbursement rates in the country," said Walgreens
spokesman Michael Polzin, adding that California has the highest
business operating costs in the country. The company operates 360
stores in the state.

In a separate but related action, a group of independent pharmacists
and doctors have filed lawsuits against the state, accusing the head
of the state's Department of Health Services of violating federal laws
that assure access to care for Medicaid patients.

A federal judge in Sacramento is expected to decide today whether or
not to issue an injunction against the state and potentially prevent
the cut.

Pharmacists, doctors, dentists and others who serve California's
nearly 6. 5 million Medi-Cal patients say cuts to the state health
program that takes care of the poor and disabled may force them to
stop accepting Medi-Cal, reduce services or even go out of business.

Under former Gov. Gray Davis, the state Legislature over the summer
approved a 5 percent reduction in provider reimbursements scheduled to
go into effect on Jan. 1 and save California an estimated to save
$115.1 million. On top of that cut, newly elected Gov. Arnold
Schwarzenegger has proposed an additional 10 percent cut in
reimbursements. That cut, if approved by the Legislature, is estimated
to save the state $160.9 million in the 2003-04 fiscal year.

State officials say the cuts are necessary because of the budget
deficit.

"During the current fiscal year, we face an unprecedented fiscal
challenge. And, because of that, there's no area of the state budget
that hasn't faced significant belt tightening," said Ken August,
spokesman for the state Department of Health Services, which
administers the Medi-Cal program. He declined to comment on the
litigation.

Already, a growing number of doctors in the state have stopped
accepting Medi-Cal patients and that number is expected to increase as
a result of the cuts. That will make it even more difficult for
Medi-Cal patients to find doctors to treat them.

But almost all the 6,000 pharmacies in the state fill Medi-Cal
prescriptions. The option of dropping Medi-Cal patients is especially
difficult for inner-city pharmacies, where those patients make up the
bulk of the business.

"If I don't get paid enough to cover my expenses, I'll have to close
up," said pharmacist Roy Koss of Los Portales Pharmacy in San
Francisco's Mission District, where about 90 percent of his customers
are Medi-Cal recipients. "The state has really put the whole medical
system in jeopardy."

Medi-Cal recipient Eliseo Aban, 81, travels from Mission Street and
Bayshore Boulevard, where he lives, all the way to Koss' pharmacy near
the intersection of Mission and 21st streets because he likes the
service and has had rude experiences at larger chains.

"I prefer this place because they are really nice people," said Aban,
who would be sad if the pharmacy went under.

Walgreens, because of its size and the fact it sells a wide range of
items, can play hardball and threaten to pull out of the Medi-Cal
program without going out of business.

Walgreens, which has the fourth-largest number of drugstores in
California, has come to blows with other states over Medicaid in the
past. In 2002, Walgreens announced it would withdraw from the Medicaid
market in Massachusetts over the state's proposed 11 percent cut in
reimbursements, but agreed to stay after the state reduced that to 4
percent. In 2001, Walgreens said it would have to reduce pharmacy
hours in Illinois because of that state's proposed reductions, but the
state backed off on those cuts.

The proposed cuts are making strange bedfellows out of two sides that
have often been at odds: the independent pharmacies and the chain
drugstores. But on this issue, the small pharmacies, which have
complained about being pushed out of their neighborhoods by the larger
chains, and Walgreens agree.

While there are more Rite Aid, Albertson's and Longs pharmacies
statewide, the potential pull-out of Walgreens from the Medi-Cal
business would have a particularly large impact on San Francisco,
where Walgreens commands about 41 percent of the market.

"If they pull out, it's going to be disastrous for the Medi-Cal
patient in San Francisco," said Lynn Carman, a San Francisco attorney
who is representing the independent pharmacies in the lawsuit, which
was filed on Oct. 6.

The California Medical Association, which represents physicians, and
11 other groups also filed suit on Nov. 7 against the state. Because
the suits are similar, they will be heard together today before Chief
District Judge David Levi in Sacramento.

The impact of the cuts could go beyond Medi-Cal patients. The cuts
could affect both the workers' compensation program and Medicare
recipients who currently do not have drug coverage.

Because reimbursement for medications used to treat workers' comp
patients are tied to Medi-Cal rates, pharmacists say reimbursements
for those drugs would also be lower.

As for Medicare recipients, those who do not have a drug benefit can
present their card to pharmacies that accept Medi-Cal and receive the
Medi-Cal rate, which is about 20 percent below retail. If that
pharmacy does not accept Medi-Cal, those seniors are out of luck.

Finally, the type of drugs prescribed to Medi-Cal patients are also a
factor in the debate. A disproportionate number of Medi-Cal
recipients, compared with the general population, take anti-psychotic
medications, which tend to be expensive.

For example, the largest drug expenditure for fee-for-service Medi-Cal
patients is Zyprexa, a drug typically used to treat people with
schizophrenia or bipolar disorder. The state department of Health and
Human Services, which spends more than $3.4 billion a year after drug
rebates on Medi-Cal drugs, reported it spent more than $261 million
during the year on that drug alone.

"If they don't get the drugs, you end up paying even more because they
end up in psychiatric institutions and hospitals. It ends up costing
the system much, much more," said Alina Salganicoff, vice president of
Kaiser Family Foundation.
Medi-Cal's top 10 drugs

The top 10 medications based on the amount of Medi-Cal reimbursements
from October 2002 to September 2003.


        Rank Drug       Use            Amount
           1 Zyprexa    anti-psychotic $261.0 million
           2 Risperidol anti-psychotic 152.9 million
           3 Prevacid   gastric reflux 114.0 million
           4 Celebrex   arthritis      102.6 million
           5 Lipitor    cholesterol    100.5 million
           6 Seroquel   anti-psychotic  99.2 million
           7 Neurontin  anti-seizure    63.3 million
           8 Prilosec   gastric reflux  59.6 million
           9 Zorcor     cholesterol     57.7 million
          10 Paxil      depression      57.6 million.
    Source: California Department of Health


    CHART2:
    Top 10 Medi-Cal prescriptions
    The top drugs based on the number of prescriptions written from
October
2002 to September 2003.

CHART:
BC:
.


        Rank Drug        Use          No. of Rx
           1 Vicodin     pain           893,769
           2 Lipitor     cholesterol    852,947
           3 Tylenol
              w/codeine  pain           830,347
           4 Tylenol     pain           810,566
           5 Celebrex    arthritis      762,777
           6 Ibuprofen   pain           722,499
           7 Lasix       diuretic       718,408
           8 Zyprexa     anti-psychotic 698,148
           9 Norvasc     blood pressure 679,350
          10 Antibiotics infection      676,475.
    Source: California Department of Health Services..