Drugstore giant Walgreens announced this week in the lagging economic climate it expects increased pressure from states regarding Medicaid reimbursements for drug prescriptions.

“As states wrestle with budget difficulties and the need to reduce overall spending, we do expect pressure to continue on Medicaid reimbursement,” Walgreens President and CEO Greg Wasson said Tuesday during the company’s second quarter earnings conference call.

Medicaid beneficiaries typically pay between $1 and $3 per prescription. However there are exceptions, such as for children or pregnant women, who do not have to pay at all. Also, if the beneficiary cannot afford to pay the fee, the pharmacy must still dispense the drug. But if states cut reimbursement payments to the pharma giant, the chain might threaten to stop carrying the government-backed health insurance plan, according to Sellers Dorsey Senior Consultant Kip Piper.

State agencies set the reimbursement rates, which determine how much a pharmacy will receive from the state for each Medicaid prescription it fills. Piper said Medicaid historically has reimbursed better in terms of dispensing fees than private insurance companies, however, with states tightening their budgets across the country, this may not continue to be the case.

"States in a severe budget crisis don't have the money to cover Medicaid costs," Piper said. "And looking down the road in 2014, Medicaid nationally will have at least 25% more people enrolled."

Walgreens spokesperson Tiffani Washington said this government budget-tightening issue is facing all pharmacies across the country that honor Medicaid prescription plans.

"It's an industry issue, not a Walgreen's issue," Washington said. "One way to combat this is better use of generics."

Piper said he thinks some pharmacies may threaten to drop Medicaid coverage as a bargaining tool to prompt states to raise their reimbursement rates. However, he added, with budgets being a primary concern, it’s less likely the states will play ball.

"This is not unlike what has happened with physicians not taking Medicare or Medicaid patients because rates are low," Piper said. "We have a general problem nationwide with respect to providers being increasingly reluctant to take government patients."

But Washington said Walgreens has no plans to drop coverage for any Medicaid beneficiaries at the present time.

"We participate in all Medicaid plans and right now our plan is to continue to work with states on ways to address their budget deficits," she said.

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