Demographics, managed care threaten viability of rural pharmacies, say Minnesota officials

Shortages now overlooked but will become a huge’ national problem

The shortage of pharmacists in rural areas is a "big, bad problem" that isn’t receiving enough attention from urban and federal legislators, says Robert Mulder, a legislator from rural Minnesota who is both a physician and pharmacist.

He wants his state legislature to help the financial health of both pharmacists and pharmacies in rural areas. His is just one of efforts around the nation to protect independent and small pharmacies threatened by demographics and the expansion of managed care.

"This is a huge national problem," says William Bond, executive vice president and chief executive officer of the Minnesota Pharmacists Association. "The same issues and the same forces are at work in other parts of the country."

A number of states are using both their regulatory and market clout to protect the availability of independent pharmacies and pharmacists. For example, Minnesota legislators in their next session will be asked to forgive loans and expand the professional scope of pharmacists who practice in rural and underserved areas. The proposal this spring passed the Minnesota House of Representatives but stalled in conference committee.

Arkansas Medicaid officials are considering taking advantage of their market power to help independent and smaller chain drug stores. They’re set to ask HCFA officials to approve a plan that reimburses less for pharmacy as the size of the chain goes up.

Minnesota’s concern about access to pharmacy services comes at a time when the number of pharmacists and the ratio of pharmacists to residents is at a 20-year high. The number of active licensed pharmacists in Minnesota is about 5,200, up from about 4,000 in 1980. The ratio is 11.09 per 10,000 population, up from 10.16 in 1980.

The problem is the age and geographic distribution of the pharmacists. The average age of Minnesota pharmacists increased from 42 to 44 during the 1990s, and the percentage of the pharmacists in the 40 to 49 age bracket grew from 25% to 43% during the same time.

The concern is for rural areas, where the retirement of a single pharmacist can be devastating. Minnesota policy-makers have identified about 140 one-pharmacy towns at risk of losing access. While the number of pharmacy licenses in Minnesota grew by 78% between 1982 and 1998 — from 217 to 386 — the number of licenses for community, non-chain pharmacies dropped 42%, from 918 to 532.

Minnesota officials are considering a variety of responses to the problem:

Loan forgiveness. The Minnesota proposal (HF 1593) would drop a year of loan repayments for each year a pharmacist served in a underserved area as defined by the state’s commissioner of health, similar to programs now available for physicians.

Pharmacy loans. The bill also would make available loans to pharmacies in underserved areas. Proposals to help pharmacies, typically for-profit businesses, are a bit more difficult politically, Mr. Mulder concedes.

Disease state management. Minnesota legislators considered a pilot disease stage management program as a way to help support rural pharmacists. Their proposal doesn’t limit the pilot to pharmacists in rural areas, but the intent was to provide a way for endangered pharmacists to expand their revenue base.

Government ownership. Small communities that want the benefit of a pharmacy may just have to pay for it, says Minnesota’s Mr. Mulder. While not addressed in his bill, he suggests that in towns where the market threatens or takes away a sole pharmacy, the local government should consider ways to purchase the pharmacy and hire the pharmacist. One carrot for the drug store is that a government-owned pharmacy section of the store could be considered nonprofit and therefore tax exempt, he says.

If you’re not part of the solution

Arkansas’ restructuring is an attempt to achieve two public policy objectives — slowing down the annual 18% rise in pharmacy expenditures while protecting smaller pharmacies. With state expenditures for pharmacy anticipated to hit $200 million for the year ending June 2000, state officials realized that any significant cuts would have a profound effect on the structure of the pharmacy industry in the state.

Effective July 1, Arkansas Medicaid reimburses pharmacies the average wholesale price less 10.5%, plus a dispensing fee of $5.51. The proposed change would keep that reimbursement level in place for independents and chains with fewer than five stores. For chains with five to nine stores, the discount rises to 16%. For chains with 10 or more, the discount would be 18%. State officials estimate the change would save Medicaid as much as $5 million per year in pharmacy costs.

Contact Mr. Mulder at (651) 296-4336 and Mr. Bond at (651) 697-1771.