FRANKFORT — A provision slipped into state law last year will force Kentucky to pay pharmacists the highest fee in the nation for dispensing prescription drugs under Medicaid.

        Dismayed Medicaid officials learned this week the law requires the state to increase the dispensing fee to $5.88 a prescription. The officials are already struggling to reduce a multimillion-dollar Medicaid deficit — much of it fueled by soaring prescription-drug costs. The new law will cost the program an estimated $20 million a year.

        The state currently pays pharmacists a dispensing fee of $4.51 a prescription, an amount Medicaid officials reduced earlier this year through a controversial emergency regulation to save money. The state had paid pharmacists $4.75 and nursing homes $5.75 to dispense drugs under Medicaid.

        By contrast, private insurance companies pay an average dispensing fee of $2.53.

        Medicaid is a federal-state program that helps pay for health care for the needy, aged, disabled and poor families with children.

        The measure requiring the fee increase was offered as an amendment to an unrelated health-insurance bill, House Bill 608, by Sen. Julie Rose Denton, R-Prospect. A separate provision she added to the bill loosened controls on expensive, brand-name drugs Medicaid must pay for — increasing Medicaid's pharmaceutical costs, according to a report in the Courier-Journal on Saturday.

        The law requires Medicaid to base the dispensing fee on what pharmacists report as their cost of doing business, and the increase resulted mostly from a steep increase in pharmacists' salaries, according to an outside study Medicaid received this week.

        The average pharmacist's salary rose from $35,000 in 1998 to $45,000 in 2001 — an increase of 28.5 percent.

        Kathy Kustra, a top Medicaid adviser to Gov. Paul Patton, said Friday that the 2000 law forcing the state to increase the fee must be changed when lawmakers convene in January.

        “The point here is to get rid of the statute,” she said.

        Ms. Kustra said it appears Medicaid must begin paying the higher fee in January, though lawyers are researching the matter to see whether there's any way to defer paying it.

        Pharmacists' lobbyists objected to the earlier rate cut but probably won't fight for the new, higher rate, said Steve Hill, a Liberty, Ky., pharmacist and member of the Kentucky Pharmacists Association.

        “We know we're going to give up something,” said Mr. Hill, also a member of a state committee that oversees prescription drugs for Medicaid. “We're willing to do that.”

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