Independent drugstores are raising questions about the state’s effort to save tens of millions of dollars by rolling pharmacies into Medicaid managed care.

Not long after the state rolled pharmacies into Medicaid managed care in March—an effort to save tens of millions of dollars a year—Ronald Barrett noticed something unusual at his store, Oak Cliff Pharmacy in southern Dallas. When he entered a child’s prescription into his computer to see how much he would be reimbursed by CVS Caremark, the managed care plan’s pharmacy benefit manager, he got an error message. A phone call indicated that the prescription had already been filled, at a CVS pharmacy down the road.

“I asked the child’s mother, ‘Did you have the prescriptions sent over there?’ And she said, ‘No, I don’t even go over there,’ ” said Mr. Barrett, most of whose customers are covered by Medicaid, the state and federal health plan for the disabled and poor. “We called the prescriber, and they said they didn’t know how they got over there either.”

Another pharmacist, in Harlingen, received a fax from a health plan managed by CVS Caremark rejecting a claim for diabetic test strips with the message, “Please route patient to a CVS pharmacy.”

Such stories have fueled suspicions among independent pharmacies that CVS Caremark is capitalizing on Medicaid changes to expand its retail business at the expense of locally owned pharmacies. CVS Caremark, which this spring became one of seven pharmacy benefit managers handling Medicaid recipients’ claims, said that its rates are competitive and there is a firm barrier between its benefit management program and CVS retail pharmacies.

The transition to managed care this spring was bumpy, with numerous computer errors and miscommunications between the State Health and Human Services Commission, pharmacists and the pharmacy benefit managers.

Although the state said that the program has become more stable and that the health plans quickly resolved the problems, many independent pharmacists—particularly those who serve a high volume of Medicaid patients—are still upset. They say the drastically reduced reimbursement rates set by the managed care plans to save the state money are forcing them out of business.

“I can’t pay my employees; I can’t pay my light bill,” said Mr. Barrett, who estimated that the overhaul decreased his revenue by 65 percent. He is currently living on his savings, he said. “I have no earthly idea why the Legislature thinks that this is acceptable.”

Texas lawmakers, who expect to save $100 million in the 2012-2013 biennium by including prescription drugs in managed care, have held hearings to address pharmacists’ concerns. The Health and Human Services Commission is conducting an audit to evaluate the reimbursement rates.

Under the old Medicaid system, the rates were the same statewide. Now, pharmacists sign managed-care contracts agreeing to accept the “maximum allowable cost” reimbursement for medications, as determined by the health plan’s pharmacy benefit manager. Because the rates are proprietary information and are not subject to open-records laws, pharmacists do not know before signing a contract how much a health plan will reimburse or how its rates compare with those of other plans before signing a contract.

Stephanie Goodman, a spokeswoman for the commission, said that the decrease in reimbursement rates is “very much in line” with what the agency expected, and that it is the same for independent and chain pharmacies. The average dispensing fee paid to pharmacists for Medicaid prescriptions dropped from $7.13 to $1.53 in the new system, and pharmacists received $12.7 million less in dispensing fees in the first month than they would have under the previous system.

John Calvillo, president of the Rio Grande Valley Independent Pharmacy Association, said he has a list of 26 independent pharmacies that have closed or been sold to retail chains since the managed care changes. He said that CVS Caremark is largely to blame because it has the lowest reimbursement rates of the five managed care plans he accepts. And, he contended, it appears to be trying to poach independent pharmacies.

In my opinion, it’s kind of a little conspiracy and the state is allowing this to happen,” Mr. Calvillo said.

The state made Medicaid changes with a view to ________.

The experiences of independent pharmacies caused them to ________.

By “bumpy”, the writer tends to say ________.

Before signing managed-care contracts, pharmacists do not know the reimbursement rates in that ________.

John Calvillo’s attitude towards the Medicaid change is ________.