Proposed Federal Limits Medicaid on Generic Drug Reimbursement Continue to Fall Short

By Kevin Schweers

Federal Medicaid officials published their fourth batch of draft federal upper limits (FULs) for generic drug reimbursement, but the proposed levels remain inadequate and, if implemented, could force many small independent pharmacies out of the Medicaid program, NCPA told the agency in a recent letter.

Medicaid is an important part of the average community pharmacy’s revenue (about 15 percent, on average) and can make up as much as 50 percent of revenue for some rural pharmacies. Medicaid is also set to expand to millions of new individuals in 2014.

After reviewing the latest proposed FULs from the U.S. Centers for Medicare & Medicaid Services (CMS), NCPA concluded that payment caps would reimburse independent pharmacists below their acquisition cost on hundreds of products, or at least 36 percent of the total list.

NCPA’s letter underscores issues previously raised by a total of 52 U.S. Senators and Representatives as well as NCPA and NACDS.

Highlights from the letter, available in its entirety here, include the following:

  • Implementing the FULs as proposed would be penny-wise and pound-foolish. Medicaid patients could lose access to their community pharmacy, triggering negative health outcomes or increased utilization of more expensive health interventions.
  • Most states adopt their own pharmacy reimbursement caps that are lower than the FULs. That almost certainly means that independent community pharmacies would be faced with losses even greater than those imposed by CMS’ proposed caps.
  • CMS should use its statutory flexibility to set a higher FUL for independent community pharmacies which, despite their best negotiating efforts, purchase generic drugs at a relative premium compared to national chains. Doing so would also help preserve pharmacy access in underserved rural and inner-city areas where an independent may be the only pharmacy provider available.
  • As CMS’ efforts to develop a National Average Drug Acquisition Cost (NADAC) database continue, the agency should ensure that no federal upper limit is set below the NADAC. Failure to do so could result in even larger cuts to pharmacy reimbursement and further endanger Medicaid patients’ access to an independent community pharmacy.
  • The problem with the FULs proposed by CMS stems from the flawed average manufacturer price (AMP) data on which the agency is relying. CMS should cease publishing additional FUL lists until its underlying data problems are resolved.

Independent community pharmacies are the backbone of Medicaid’s drug benefit. NCPA will continue working with CMS, Congress and the states to ensure patient access and reasonable pharmacy reimbursement.

1 Response to “Proposed Federal Limits Medicaid on Generic Drug Reimbursement Continue to Fall Short”

  1. 1 James Cobb January 26, 2012 at 3:05 pm has developed a database of generic PAC “pharmacy acquisition cost” benchmarks for all generic products at the NDC level. It is valid and far different than First Data, Medispan and Myers & Stauffers’ out-dated survey figures. The CMS is aware of our capabilities, but chooses to spend millions to provide invalid figures. All independent, retail pharmacists have access to this site. It reflects ingredient cost profits for all A multi-source generic pharmaceuticals by NDC on a real-time basis.

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