Pharmacists Warn Medi-Cal Cutback Might Be Ruinous

Health Care
by Laurence Darmiento

It may not seem enough to break the bank, but independent pharmacists claim that $110 million in proposed budget cuts to the state Medi-Cal program could put them out of business.

The pharmacists, who are concentrated in rural areas and the inner city, receive payments for filling prescriptions of low-income Medi-Cal recipients, as do bigger pharmacies participating in the Medi-Cal program.

But unlike chains such as Sav-on and Rite Aid, the independents rely on prescriptions for a larger portion of their revenues and have a greater percentage of Medi-Cal clients. As it is, they squeak by on an average 2.5 percent profit margin, according to the California Pharmacists Association.

"Every prescription is important to my survival," said Harold Washington Jr., manager of family-owned Bevins Pharmacy in South Central Los Angeles.

The cuts one more way the governor is seeking to close the $24 billion state budget gap would hit pharmacists twice: through a 5 percent reduction in drug reimbursements and a 50 cent reduction of a $3.95 dispensing fee they receive for each prescription. The fee is intended to cover pharmacists' insurance, margin and other expenses.

State law also requires pharmacists who participate in the Medi-Cal program to charge seniors enrolled in Medicare a discounted reimbursement rate for prescription drugs. That's 10 to 15 percent off regular prices, said Carlo Michelotti, chief executive of the pharmacist association.

"It's a break for seniors out of the cash register of pharmacists," Michelotti said.

The state Department of Health Services, which runs the Medi-Cal program, is aware of the concerns, but a spokesman pointed to the size of the budget deficit. "There are no departments in the state that have not done some belt tightening as a result," said spokesman Ken August.

Independents are left with a choice of absorbing the losses, or dropping out of the Medi-Cal program and losing customers.

Specialty News

It's good news, bad news for Specialty Laboratories, Inc., the Santa Monica-based clinical laboratory that had its Medicare and Medicaid license suspended this year over charges of using unqualified lab personnel.

The lab is now in "substantial compliance" of California clinical laboratory law, according to a letter from the state Department of Health Services released by the company in a Securities and Exchange Commission filing.

The letter followed an unannounced inspection of the lab last month, but does not mean the company is in the clear with regulators.

The bad news? Specialty announced it will take a one-time charge of at least $3.5 million for the second quarter ended June 30 as a result of its troubles.

Specialty Labs, which replaced its chief executive, was trading over $8.50 a share last week, better than its 52-week low of $6.15 in June, but far off from a 52-week high of nearly $39 last summer.



Staff reporter Laurence Darmiento can be reached at (323) 549-5225 ext. 237 or at ldarmiento@labusinessjournal.com.

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