NCPA Renews Concerns over Medicaid Generic Drug Reimbursement Changes

By Kevin Schweers

The U.S. Centers for Medicare & Medicaid Services (CMS) has published the 11th version of its draft federal upper limits (FULs) for Medicaid generic drug reimbursement, but the results are getting worse, not better, than preceding lists in terms of assuring continued patient access to prescription drugs and pharmacy services.

The National Community Pharmacists Association (NCPA) reinforced that point in a recent letter to CMS officials.

“Imposing these FUL reimbursement cuts on small independent pharmacies would have a significant and negative affect on Medicaid patients’ access to pharmacy services,” NCPA wrote in its letter. “Independent community pharmacies serve a disproportionate share of Medicaid patients. If our Medicaid revenues are significantly reduced—as they would under these FULs—many of our pharmacies could close or reduce hours, impeding access to care, especially in urban and rural areas.”

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

  • The percentage of products with an FUL that is below a community pharmacy’s acquisition cost (not including its cost of dispensing) remained high – increasing slightly from 37% to 38%. For these below cost reimbursements, the average loss per unit product for a pharmacy increased from 29.6 cents to 41 cents, were these FUL payment caps to be implemented.
  • The average loss per unit product for a pharmacy steadily increased over the eleven draft lists. The first draft had an average loss per unit product of 21.6 cents. By the eleventh draft list, the average loss per unit product rose to 41 cents, an astonishing 89% increase.

The proposed FUL 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.

NCPA’s letter concluded with a request that CMS finalize the AMP criteria through the rulemaking process; collect and analyze several months of data; and require states to evaluate their pharmacy dispensing fees to ensure they are compensate pharmacists fairly, particularly in light of any reductions in prescription drug reimbursement.

On another score, as if there weren’t enough questions and uncertainty on the AMP/FUL side, CMS is pushing forward with publishing two other Medicaid pharmacy benchmarks: NADAC and NARP.

NADAC is the National Average Drug Acquisition Cost for community pharmacies (the supposed in-the-door price) while NARP is the National Average Retail Price (or the so called out-the-door price). NADAC reflects pharmacy invoices, while NARP is supposed to be calculated from a yet-to-be-identified series of files that would reflect a blend of cash, third party and Medicaid payments pharmacies receive.

There are many flaws in the way that CMS is implementing both of these benchmarks. They indicate that they will have draft files of both these other benchmarks soon.

NCPA is assessing its course of action relative to the FULs as well as NARP and NADAC because states’ use of these benchmarks could have a negative impact on pharmacies, their ability to serve patients, and ultimately patient care.

4 Responses to “NCPA Renews Concerns over Medicaid Generic Drug Reimbursement Changes”

  1. 1 James Cobb August 27, 2012 at 4:35 pm

    Nice article Kevin. We received feedback from Joe Fine regarding the average manufacturing price and the federal upper limit possibly being replaced by the national average drug acquisition cost in the Medicaid equation. Mr. Fine stated that there might not be a need for FUL in the future as a ceiling to state Medicaid reimbursements. Is the NCPA aware of this possibility or is the CMS’s statement a reflection of their concern over the AMP’s validity or future use?

    • 2 ncpa1 September 7, 2012 at 7:15 pm

      Thanks for the kind words, James. Regarding your question, our understanding is that the law requires that CMS set FULs – so CMS couldn’t eliminate them without a change in law. While we haven’t seen his exact comments, Joe Fine may be saying that states may forgo using FULs because they will have NADAC. The only problem with that is that FULs may be lower than NADAC. Some states may not want to use NADAC instead of FULs if the FULs are lower.

  2. 3 Van G. Coble Dph, CDM, FASCP August 29, 2012 at 6:52 pm

    My take is that we need a realistic acquisition cost for dispensing prescriptions. This accurately reflect an average market based acquisition cost. Secondly, we have to have a realistic dispensing fee better than the several years old Grant-Thorton Survey, and preferable a small % to allow for net profit.

    As long as we allow someone to determine a “cost” for us we are going to be in the hole. Pharmacists are the first to gripe about transparency of the PBMs, but we have not been willing to be transparent with our costs. Lack of transparency is one of the causes of our reimbursement issues today. Clinging to AWP for so many years has destroyed our credibility.

    Having said that, our cost is what is invoiced from our wholesaler. Our true cost, invoice minus any rebates or discounts, is privileged information. This the bonus achieved for being an astute business person. If you use a wholesaler that does not use rebates, then you should be able to come up with a “trade discount” program. Invoice at normal price, and then receive a discount when you pay on time.

  3. 4 Jeff September 26, 2012 at 7:35 pm

    It just kills me when a customer asks to speak with a pharmacist about a medication they are taking and after spending 10 minutes of my pharmacist’s valuable time, the customer let’s us know that they are getting their meds through mail order. I would love to figure out a way to bill the customer or Medco $30 for a consultation fee.

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