“Fiscal Cliff” Deal Has Consequences for Pharmacies

Editor’s Note:  Unfortunately, CRE’s repeated warnings about the expansion of competitive bidding are proving to be true.

From: Pharmacy Times

Daniel Weiss, Senior Editor

After several months of negotiations among legislators and the White House, both houses of the United States Congress have passed a bill to dampen the effects of the “fiscal cliff,” a combination of spending cuts and tax increases that were set to go into effect at the beginning of 2013. The bill, which President Obama is expected to sign into law, will affect the majority of Americans, but several of its elements will have specific consequences for community pharmacies. Most prominent among these is the inclusion of diabetes testing supplies sold by retail pharmacies in a competitive bidding program for durable medical equipment established by the Medicare Modernization Act of 2003. Retail pharmacy–supplied diabetic testing supplies had been exempted from the competitive bidding program until 2016, but will now be reimbursed at lower rates starting on April 1, 2013. This change is estimated to save the government $600 million, but pharmacist associations argue that the new rates will negatively impact retail pharmacies and their customers. The change “would effectively force many community pharmacists to stop providing diabetes test supplies (DTS) to Medicare beneficiaries,” said John Coster, RPh, PhD, senior vice president for government affairs at the National Community Pharmacists Association (NCPA), in a press release. “The bill would do this by applying DTS reimbursement rates to local pharmacies that are effectively set by large mail order operations.” Dr. Coster also noted that the bill includes a number of provisions that the NCPA supports: a temporary delay in cuts to Medicare and the TRICARE program, as well as a $5 million exemption to the estate tax, which will make it easier to pass family-owned pharmacy businesses from one generation to the next. In an email, Carol A. Kelly, senior vice president for government affairs and public policy at the National Association of Chain Drug Stores (NACDS), noted that if scheduled cuts in discretionary spending go forward in several months, pharmacies could face further reductions in reimbursements. “If sequestration cannot be avoided, pharmacies would experience reimbursement reductions for Medicare Part B drugs and immunizations,” she wrote. “In addition, Medicare Part D plans facing cuts would likely reduce pharmacy reimbursement, too.” More broadly, the bill achieves the following:

• Payroll taxes, which fund Social Security and are imposed on the first $113,700 of income, will return to 6.2% from 4.2%, where they have been set since 2009 to help encourage personal spending.
• Taxes will increase from 35% to 39.6% on income over $400,000 for individuals and $450,000 for families. Taxes on income under this threshold, which were set to rise, will remain the same.
• Taxes on capital gains and dividends will rise to 20% for those with income above the $400,000/$450,000 threshold, but will remain at 15% for those with income below it.
• The estate tax will be set at 40% with the first $5 million of an estate exempt from taxation, and the exemption level will rise with inflation.
• Tax breaks for low-income earners expanded in 2009 will be extended for 5 years: the Earned Income Tax Credit, the Child Tax Credit, and the American Opportunity Tax Cut.
• The Alternative Minimum Tax will be permanently patched to prevent taxes from rising on some in the middle class.
• Limits on exemptions and deductions for higher-income earners will be re-imposed.
• Temporary business tax breaks on things such as research and wind energy development will be extended for a year.
• Scheduled cuts in reimbursement to doctors under Medicare will be put off for a year.
• Federal unemployment insurance benefits for those who have been out of work for at least 26 weeks will be extended for a year.
• The farm bill will be extended for 9 months, preventing a sharp increase in milk prices.