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Medicaid News
CMS Issues Final Rule for Medicaid Prescription Drug
Reimbursements
Ensures discounts obtained by private entities but
small pharmacies concerned
July 11, 2007 -
The Centers for
Medicare & Medicaid Services (CMS) on
Friday released a final rule that will change the Medicaid prescription
drug reimbursement formula for pharmacies from being based on the
average wholesale price to being based on the average manufacturer
price, CongressDaily reports (Edney, CongressDaily, 7/10).
The rule, mandated by the Deficit Reduction Act of
2005 and scheduled to take effect on Dec. 30, seeks to ensure that
Medicaid can obtain prescription drug discounts similar to those
obtained by private entities.
The rule would redefine AMPs for brand-name and
generic prescription drugs. States use AMPs to calculate Medicaid
reimbursement rates for drugs. Under the rule, the federal government
would post AMPs on a Web site that consumers could access. In addition,
the rule would limit the federal share of the cost of prescription drugs
when at least three generic alternatives are available (Kaiser
Daily Health Policy Report, 6/28).
The rule was issued after reports published in 2004
by the
Government
Accountability Office and the
HHS
Office of Inspector
General found that states were using artificially inflated
commercial drug pricing guides to set drug reimbursement levels (Reichard,
CQ HealthBeat,
7/9).
As concessions to pharmacy groups, CMS in the final
rule excluded from the formula pharmacy benefit managers, which receive
deep discounts, and pharmacies in nursing homes and assisted living
facilities. CMS in a press release said the new rule would save states
and the federal government $8.4 billion over the next five years (CongressDaily,
7/10).
Pharmacy Response
Groups representing small pharmacies say that in
practice, the rule will decrease the reimbursement rates to less than
the actual cost of acquiring generic drugs for community pharmacies. A
GAO report released earlier this year found that reimbursement levels
would average 36% less than the average retail pharmacy acquisition
costs.
CMS "failed to address what GAO said," according to
Charlie Sewell, a lobbyist with the
National Community
Pharmacists Association. The average community pharmacy gets
23% of its revenue from Medicaid, according to Sewell, who added that as
a result of the rule, "community pharmacies are going to close right and
left across America." Sewell estimated that pharmacies that rely on
Medicaid for over 50% of their business would have to close early next
year because of the rule. An additional 6,000 to 7,000 pharmacies
eventually would close because of the loss of Medicaid revenue, Sewell
predicted (CQ HealthBeat, 7/9).
Bruce Roberts, president and CEO of NCPA, said, "If
the current policy is fully implemented, community pharmacies will be
forced to make the impossible choice of turning their backs on
vulnerable patients by dropping out of the Medicaid program or
continuing in a program that threatens to bankrupt their businesses."
Steven Anderson, president and CEO of the
National
Association of Chain Drug Stores, said, "CMS took a few
actions that, while headed in the right direction, are not nearly
sufficient to remedy the legitimate concerns" of community pharmacies (CongressDaily,
7/10).
Crystal Wright, spokesperson for the
Association of
Community Pharmacists Congressional Network, said CMS was too
vague in defining AMPs, an action her group believes was taken "to keep
Congress in the dark about how severely they will under-reimburse
pharmacists."
CMS Response
CMS in a release said that the new formula is
necessary because "Medicaid payments to pharmacies for generic drugs
were much higher than what pharmacies were actually paying for those
drugs." Prices in the commercial drug pricing guides that formerly were
used by states to set reimbursement levels were "artificially inflated,
especially for generic drugs," according to CMS. CMS said that
pharmacies "made the most profit on those generic drugs with the highest
mark-up, creating an incentive to dispense those drugs" (CQ HealthBeat,
7/9).
Acting CMS Administrator Leslie Norwalk said, "This
new payment formula allows Medicaid to pay more appropriately for
prescription drugs dispensed to Medicaid beneficiaries." CMS projects
$8.4 billion in savings over the next five years as a result of the new
rule (CongressDaily, 7/9).
Lawmaker Response
Senate Finance
Committee Chair Max Baucus (D-Mont.) said he is "deeply
concerned that this rule will limit the flow of crucial Medicaid
reimbursement dollars into small, rural pharmacies," adding that he will
"closely review the final CMS rule and continue to protect access to
medications that local pharmacies provide." Baucus said, "All options
are on the table for getting Medicaid beneficiaries and all rural
Americans the medicines they need."
Pharmacy groups are working with lawmakers on
legislation to substitute the AMP with the retail pharmacy acquisition
cost. The groups are "vying to attach the proposal to any major health
care legislation likely to make it out of Congress this year," according
to CongressDaily (CongressDaily, 7/10).
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