The Changing Coverage & Reimbursement Landscape


What are the shifts in government policies with greatest potential to impact community pharmacies?

July 2014

As federal and state governments continue to implement a host of new policies, regulations and programs due to health reform, these shifts have great potential to affect community pharmacies. Below are four major trends pharmacies should be aware of that may provide opportunities for future growth, but also pose challenges.

  1. Growth of U.S. Government as a Payer: The U.S. government is paying for a larger portion of prescriptions — a trend that is expected to continue. As a result, pharmacies face new volume opportunities, as well as ongoing margin pressure. Specifically, in 2008, Medicare Part D and Medicaid accounted for 44% of the prescriptions filled by independent pharmacies, based on survey data. By 2012, these government payers represented 51% of all prescriptions.1 Further, coverage expansion in healthcare reform and the aging population entering Medicare are expected to increase government-funded prescriptions. In fact, by 2017, Medicare and Medicaid are expected to add a combined 15 million beneficiaries. In addition, 25 million Americans are expected to enroll in coverage through the health insurance exchanges.2 While coverage expansion could mean greater volume, margins will likely continue to face pressure as payers work to control healthcare costs while simultaneously expanding insurance coverage.
  2. Medicaid Reimbursement Changes: The Affordable Care Act redefined the average manufacturer price (AMP) and proposed a method for its use to calculate reimbursement rates for many generic drugs (via the federal upper limit (FUL)). However, after several delays, final regulations have not yet been released, though many expect the final AMP rule to be published in the coming months. The delay is creating uncertainty in pharmacies across the country as it will result in a lower FUL compared to that currently in use, leading to lower Medicaid reimbursement for generics in many states. In addition, several state Medicaid programs are beginning to move to reimbursement based on average acquisition cost (AAC), which is an invoice-based pricing metric. However, these changes have been associated with increases in dispensing fees, which serve to partially offset the reimbursement impact.
  3. New Care-Delivery Models: One key focus of healthcare reform is a shift from a fee-for-service reimbursement model to a system that emphasizes value, coordination of care and enhanced quality. New healthcare-delivery models — such as patient-centered medical homes (PCMHs) and accountable care organizations (ACOs) — are growing. In these models, providers are focused on coordinating the care that is delivered to entire populations. Community pharmacists have the opportunity to play a key role in these evolving models as part of the care delivery team focused on medication management.
  4. Evolving Pharmacist Role: In addition to the traditional role of dispensing prescriptions, most retail pharmacists are performing clinical services, such as medication therapy management (MTM), disease management, medication reconciliation, disease screening, and preventive services. There is an increased focus on expanding reimbursement for the number of growing services offered in the pharmacy. Legislation has been introduced in Congress to recognize pharmacists as providers for payment for certain services under Medicare Part B.3 State policymakers also continue to consider measures on this issue.

Overall, these are times of change with significant opportunities for community pharmacists and retail pharmacies. There is great potential for increased volume, for connecting with other providers in new care models, and for generating revenue by providing additional types of clinical services. However, there is also ongoing pressure on margins, greater emphasis on clinical quality and patient outcomes, growth of narrow and performance-based networks, and a need to communicate pharmacists’ value with other providers as the scope of services provided by pharmacists grows. Those pharmacists who understand the changing landscape and act aggressively to develop new capabilities and capitalize on the emerging opportunities will realize the greatest success.

1 NCPA Digest, 2013.
2 Avalere Health estimates, January 2014.
3, H.R.4190 — To amend title XVIII of the Social Security Act to provide for coverage under the Medicare program of pharmacist services,
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