May 20, 2008
Alexandria, Va. — May 20, 2008 — An economic impact study of the Deficit Reduction Act (DRA) of 2005 finds that 11,105 pharmacies across the country could close due to reductions in the Medicaid reimbursement rate, well below their cost to fill prescriptions. These pharmacies generate more than 300,000 jobs and $31.1 billion throughout the nation’s economy.

The report, released jointly today by the National Association of Chain Drug Stores (NACDS) and the Food Marketing Institute (FMI), analyzes the potential impact of the DRA on pharmacies (Impact of the Deficit Reduction Act of 2005 on Pharmacies by State), encompassing chain drug stores, independent pharmacies and mass merchants and supermarkets with pharmacies.

To the extent that pharmacy closures simply redirect patients to other pharmacies, the net impacts would be smaller. However, this offers little hope to pharmacies in rural areas and urban neighborhoods with large Medicaid populations since these areas would be unlikely to sustain their businesses and maintain pharmacy access. The loss of pharmacies for these Medicaid participants would adversely affect their health, according to NACDS and FMI.

The Medicaid program pays retail pharmacies a dispensing fee plus a reimbursement rate designed to cover the cost of acquiring the drug from the manufacturer for Medicaid
prescriptions. The changes in the Medicaid reimbursement rates under the DRA could dramatically lower pharmacy reimbursement rates and result in thousands of pharmacies closing, making pharmacies less accessible to patients.

The study is based on estimates provided in expert testimony by Steven Schondelmeyer, a professor at the University of Minnesota that 20 percent of pharmacies could close due to the DRA.

The study finds that the impact of the decrease in reimbursement rates on the number of pharmacies will vary by state. However, the largest percentage reductions in pharmacies are projected in New York (40 percent), the District of Columbia (37 percent), Louisiana (32 percent), West Virginia (30 percent) and Alaska (28 percent).

“These cuts threaten to diminish access to medications and pharmacy services, and they also threaten the vitality of communities,” said NACDS President and CEO Steven C. Anderson, IOM, CAE. “Pharmacies are the face of neighborhood healthcare, but these cuts could wipe these faces away, particularly in rural and urban areas with higher Medicaid populations.”

“In many rural and urban communities, supermarkets provide the only pharmacies able to serve Medicaid patients,” said Tim Hammonds, president and CEO at FMI. “By reducing Medicaid reimbursements as this law requires, many pharmacies would be forced to close, and low-income Americans would have to travel many miles to obtain vital medicines.”

The study was conducted for the National Association of Chain Drug Stores and the Food Marketing Institute by PricewaterhouseCoopers LLP, the assurance, tax and advisory firm.

# # #

Food Marketing Institute (FMI) conducts programs in public affairs, food safety, research, education and industry relations on behalf of its 1,500 member companies — food retailers and wholesalers — in the United States and around the world. FMI’s U.S. members operate approximately 26,000 retail food stores, plus 14,000 pharmacies, with a combined annual sales volume of $680 billion — three-quarters of all retail food store sales in the United States. FMI’s retail membership is composed of large multi-store chains, regional firms and independent supermarkets. Its international membership includes 200 companies from more than 50 countries.

The National Association of Chain Drug Stores represents the nation’s leading retail chain pharmacies and suppliers, helping them better meet the changing needs of their patients and customers. Chain pharmacies operate more than 39,000 pharmacies, employ 114,000 pharmacists, fill more than 2.4 billion prescriptions yearly, and have annual sales of over $700 billion. Other members include 1,010 suppliers of products and services to the chain drug industry. NACDS international membership includes 101 members from 29 countries. For more information about NACDS, visit www.NACDS.org.