Comparing how Medicare Part D sponsors and commercial third-party payers calculate prescription reimbursement rates and the subsequent impact on the financial viability of independent pharmacies in Texas

Anecdotal descriptions and small studies have reported decreasing reimbursements from Medicare Part D sponsors and commercial third-party payers, resulting in decreased gross margins for independent pharmacies; however, reports are inconclusive regarding which payer more greatly affects independent pharmacies’ financial viability. Using 2006-2009 prescription claims data collected by a pharmacy switching company, the purpose of this study was to calculate and describe estimated reimbursement formulas and mean gross margins to assess the relative impact of these two payer groups. The study evaluated a total of 2,929,696 prescription claims paid for by Medicare Part D sponsors (n = 1,830,896) and commercial third-party payers (n = 1,098,800). The prescriptions were dispensed by 418 Texas independent pharmacies to 192,968 patients aged 65 to 94.

Between 2008 and 2009, the median ingredient reimbursement ranged from AWP-17% to AWP-15% for Part D sponsors and from AWP-17.44% to AWP-15% for commercial third-party payers. The median dispensing fee ranged from $1.50 to $2.00 for Part D sponsors and from $1.10 to $2.00 for commercial third-party payers. For all payers, the median dispensing fee and median ingredient reimbursement decreased or was stagnant. Similarly, aggregate percent gross margin (calculated using the payers’ estimates of acquisition cost) decreased for both payer types between 2007 and 2009, with the mean gross margin of 4.0 percent earned for Part D prescriptions being higher than the 3.7 percent earned for commercial third-party prescriptions. In the same timeframe, the mean aggregate percent gross margin ranged from 2.8 percent to 6.0 percent among the five most popular Part D sponsors in the sample, and from 2.4 percent to 5.1 percent among the five most popular commercial third-party payers. The generic dispensing ratio explained a portion of the variance between and among payers.

This study shows that significant variation exists in reimbursement formulas and percent gross margin between and among several of the most popular Part D sponsors and commercial third-party payers and supports pharmacy assertions that reimbursements from both payer types are decreasing. Pharmacies can respond to these pressures by being more conscientious of their business’ margins when reviewing contracts and increasing the proportion of generic drugs dispensed.