NCPA Urges Medicaid Officials to Fix Flawed Generic Drug Reimbursement Caps

By Kevin Schweers

The most recent batch proposed Medicaid caps on generic drug reimbursement—or federal upper limits (FULs)—would be “economically devastating” for independent community pharmacies, NCPA told federal officials in a new letter. Such cuts could endanger pharmacy access for Medicaid recipients as community pharmacies may be forced to drop out of the program or, in some cases, to close altogether.

The Centers for Medicare and Medicaid Services (CMS) recently released its eighth FUL list. NCPA’s analysis found it to be worse than its predecessors in terms of reimbursing pharmacies below their drug acquisition costs.

The proposed reimbursement limits are determined utilizing Average Manufacturer Price (AMP) data from drug manufacturers. However, CMS has not yet finalized the AMP criteria, leaving wide variability in how the prices are calculated.

According to NCPA’s analysis, CMS’ most recent FULs:

  • Would reimburse independent community pharmacies below their actual acquisition cost (AAC) for 40.6% of the 959 products covered. The average loss per product has steadily increased with each new FUL list from CMS from 21.6 cents per product in July 2011 to 31.4 cents per product in the most recent list;
  • Would produce losses for independent community pharmacies as high as $98,000 annually for pharmacies dispensing a high volume of products on the FUL list; and
  • Are highly volatile, producing significant losses for independent pharmacies on common products. For example, pharmacies dispensing Metronidazole Gel to Medicaid recipients would take a loss ranging from a low of 19 cents in one month to a high of $2.38 in another month, with an average loss of $1.02, based on the FUL lists to date. For Naratripitan HCL Tablets, the loss ranged from $1.44 per tablet to $9.89 per tablet, with an average FUL of $6.58. Such volatility would create significant uncertainty for small business community pharmacies with respect to Medicaid reimbursement on a month-to-months basis.

“Plain and simple, the FUL lists are not getting any better for independent community pharmacies,” NCPA wrote in its letter to CMS. “The loss of these revenues would be devastating for independent pharmacies that disproportionately rely on Medicaid revenues and serve Medicaid patients.”

NCPA urged CMS to publish a final AMP regulation so all parties know how to calculate average manufacturer prices. Then the agency could collect several months of data to calculate draft FULs based on the final regulation, thereby mitigating the volatility seen to date and allowing all players know the “rules of the road.”

2 Responses to “NCPA Urges Medicaid Officials to Fix Flawed Generic Drug Reimbursement Caps”

  1. 1 Terry Boring May 22, 2012 at 4:45 pm

    “Flawed”? That is an understatement! I am an employer group insurance administrator and the more notices I receive from various entities the more sick I become. At some point the nonsense must stop!

  2. 2 kathy rothrock elliott May 23, 2012 at 7:52 pm

    I’m beginning to see NO LIGHT at the end of the tunnel- NONE. When the FTC allowed the merger of Express and Medco, I could not believe it. Sadly I know it’s really true- doesn’t matter if you are right or wrong, ethical or unethical, just how MUCH MONEY YOU HAVE TO GIVE. Makes me want to give it all up. CMS, the FTC, PBMs, can KMA.

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