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New York State Board Of Pharmacy

Looking for yet another big pothole on the road to retail pharmacy's future? It's almost certain that you won't have to look any farther than your own state capitol.

State policy makers and budget planners across the country have been staggered by their worst fiscal crisis since the Great Depression. Wracked by recession, job losses and falling tax revenues, states like California, New York and Massachusetts have been buried in billions of dollars worth of red ink, triggering a scramble to cut funding on health care, social services and a host of other programs.

But they're only the bleeding edge of the crisis. Nearly every state faces a severe budget shortfall, and many are whacking at Medicaid prescription reimbursements and pharmacists' dispensing fees along with other targets in an urgent bid to cut spending. According to Larry Kocot, senior vice president for policy and regulatory affairs and general counsel at NACDS, all but a few states are "in financial distress ... and Medicaid is obviously a drain on every state treasury.

"People are looking to reduce expenditures across the board, and pharmacy pops up as one of the largest and fastest-growing expenditures in the Medicaid budget. So we're a target across the country," Kocot told Drug Store News.

"Forty-six states are clearly in budgetary distress," he added, and more than two dozen "have already announced they're going to cut reimbursements."

According to the Center on Budget and Policy Priorities and the National Conference of State Legislatures, the states together are facing a total of about $80 billion in budget shortfalls this year and are expected to sustain "another $79 billion in shortfalls for fiscal year 2004.

"Hundreds of thousands of people nationwide have already lost Medicaid coverage due to state budget cuts," warned the budget and policy center, a non-profit think tank. "That number will climb to 1.7 million people if the cuts proposed by governors in 22 states [under study] ... are approved."

What's more, noted the center in a recent report, some states, including California, Colorado, Connecticut, New York and North Carolina, have had to raise their deficit forecasts as revenues have fallen short of projections. "Forced by balanced budget requirements to close these deficits, states have been cutting important programs and services, including education, health care and public safety," the report noted.

"Almost all states are experiencing significant increases in their Medicaid programs, including their prescription drug programs," added NACDS in a policy statement. "States are employing various methods to control these costs, which unfortunately often focus on the wrong targets."

Indeed, the methods states have used to balance budgets--including reimbursement cuts, reductions in dispensing fees, rises in patient copays and even attempts to tax prescriptions--have hit chain and independent pharmacies hard. They've also triggered revolts by pharmacy retailers from Massachusetts to Oregon, with chains like Walgreens, CVS, Rite Aid, Happy Harry's, Brooks Pharmacy and Stop & Shop vowing to pull out of Medicaid programs in some states unless cuts were reduced or rescinded.

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