56 Days Late--State Finally Releases Legally Required Report Regarding the Medi-Cal Pharmacy Cost of Dispensing Prescription.

Business Editors and Health/Medical Writers

SACRAMENTO, Calif.--(BUSINESS WIRE)--Aug. 30, 2002

A Legally Required "Cost Of Dispensing A Prescription" Report was

Finally Released Even Though the Department Of Health Services was

Given a Final Report In June

The California Pharmacists Association (CPhA) was successful in forcing the state to comply with statutes from SB 696 and SB 393 (Speier), which required the Department of Health Services (DHS) to conduct a study and file a report with the legislature on the cost of Medi-Cal prescription drug dispensing. The report was to be released no later than July 1, 2002 but was held at the request of the State. CPhA filed legal action to compel DHS and the Davis Administration to release this report immediately. CPhA's lawsuit was withdrawn when the report was made available.

"The release of this report is important to Medi-Cal providing pharmacists throughout the state," said Carlo Michelotti, chief executive officer of the California Pharmacists Association. "Our goal in getting this report released was to demonstrate to the legislature that the $110 million in Medi-Cal pharmacy reimbursement cuts proposed by Governor Davis would cause irreparable damage to pharmacy and access to pharmacy for seniors and the poor. Governor Davis has asked that the Medi-Cal pharmacy fee payment be cut from the current $3.95 to the 1998 level of $3.55 -- this study shows that the cost of dispensing a Medi-Cal prescription averages $6.95, almost double what the state has called for."

Myers & Stauffer - a Kansas accounting firm, did an analysis of claims during the 2000 calendar year from 798 out of more than 6,000 pharmacies. During this time, Medi-Cal paid pharmacies for approximately 27,000 drug products dispensed in 39.6 million prescriptions in a total amount of $2.4 billion for those prescription drug products. The results of this study is as follows:

Cost of Dispensing A Medi-Cal Prescription:

-- Weighted Average (Median): $6.95

-- Weighted Average (Mean): $7.21

-- Unweighted Average (Mean): $7.87

The report also noted that a higher dispensing cost was associated with pharmacies that provided intravenous, home infusion and custom compounded pharmaceuticals and concluded that the gross profit margin for a prescription is approximately $10. A significant portion of pharmacy reimbursement is associated with drug ingredient costs.

The proposed budget cuts are essentially asking that pharmacy operate below their cost of doing business. The net profit for independent pharmacies in California currently averages only 2.5 percent of sales. Independent pharmacies fill approximately 65% of Medi-Cal prescriptions, each averaging 8,100 prescriptions annually according to Myers and Stauffer. Independent or "mom and pop" pharmacies do not operate on the same economy of scale as large chain pharmacies do and, therefore, cannot absorb the Administration's proposed drastic cuts. When taken as a whole, the budget proposals would deliver a fatal blow to patient access to services from many community pharmacies in inner city and rural areas throughout the state.

The California Pharmacists Association (CPhA) is the largest state pharmacy association in the nation, with more than 5,000 members. The mission of the association is to act as the leader in advocating the role of the pharmacist as an essential provider of health care and to support pharmacists in providing optimal pharmaceutical care. CPhA has been "Uniting the Profession of Pharmacy" since 1868, and will continue to be the leader in representing pharmacists and their patients in this rapidly changing healthcare climate. Its membership is comprised of pharmacists, pharmacy students, technicians and associate members in a variety of settings, including hospital, community/retail, academia, long term care and home care.