Pharmacists to Federal Medicaid Officials: Revamp Proposed Generic Drug Federal Upper Limits to Preserve Pharmacy Access for Patients



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Alexandria, Va. - October 19, 2011

In an effort to preserve access to trusted, community pharmacists for millions of Americans, the National Community Pharmacists Association (NCPA) is offering federal Medicaid officials a number of suggestions to address flawed methodology that, if left in place, would result in potentially devastating cuts in Medicaid pharmacy reimbursement for a wide range of common, generic prescription drugs.

In a letter to the Centers for Medicare and Medicaid Services (CMS), NCPA details a number of shortcomings in the Average Manufacturer Price (AMP) data on which CMS is relying to calculate new caps on Medicaid pharmacy reimbursement, known as Federal Upper Limits (FULs), for multiple source, generic prescription drugs.

"Independent community pharmacies are the backbone of the Medicaid drug benefit," said NCPA CEO B. Douglas Hoey, RPh, MBA. "These small business pharmacists are often located in underserved rural and inner-city locations and care for twice as many Medicaid patients compared to national chain pharmacies. Community pharmacists reduce costs for Medicaid and taxpayers by maximizing the appropriate utilization of lower-price generic drugs and by providing face-to-face counseling to promote the proper use of medications as prescribed for patients. We have worked constructively with federal and state officials to find Medicaid savings and will continue to do so.

"However, the newly proposed limits published by federal Medicaid officials would reimburse independent community pharmacies at rates that are below even the pharmacy's acquisition costs for hundreds of products," Hoey noted. "The dispensing fees paid to pharmacies by Medicaid and virtually every health plan are already well below a pharmacy's cost of dispensing. So it's critical for pharmacies to be reimbursed fairly for the generic drugs they dispense, along with expert medication advice. If implemented as proposed, these caps would endanger patient access to care by forcing many independent community pharmacists to either curtail their participation in Medicaid or to leave the program altogether in order to avoid dramatic financial losses."

In the letter, NCPA explains the following concerns and recommendations:

  • The AMP data on which CMS is relying does not accurately reflect acquisition costs for community pharmacies. Even at the reimbursement baseline established in the ACA, or Affordable Care Act (175 percent of the weighted average AMP), there are hundreds of products on CMS' proposed list with FULs that are below an independent community pharmacy's acquisition costs. In addition, the ACA criteria requires FULs be set with AMPs of multiple source products that "are available for purchase by retail community pharmacies on a nationwide basis," which does not appear to be the case with the newly proposed CMS list.
  • Inconsistency among drug manufacturer practices may contribute to the below-market FULs. The lack of guidance from CMS to manufacturers in terms of fully defining AMP has resulted in widely varying manufacturer practices in calculating AMP values. This, in turn, may contribute to the inadequate FULs proposed by CMS. Consequently, the new AMP regulation should be finalized before any AMP values are used to set FULs.
  • Insufficient manufacturer data. The FULs are based on one month's AMP data, without regard to the statutorily required "smoothing process" to help avoid wild fluctuations that could occur from month to month.
  • CMS should recognize independent community pharmacies' higher drug acquisition costs. Despite aggressive efforts to negotiate lower prices, community pharmacies' acquisition costs are often 25-50 percent higher than those of publicly held chain pharmacies. The ACA granted CMS the flexibility and authority to set the FULs at a higher rate to account for that difference and to help preserve patient access in underserved rural and inner-city communities.
  • CMS should fully resolve these and other issues before publishing its final, revised FULs. The publication by CMS of below-market reimbursement caps, such as those initially proposed, could result in additional health plans adopting a flawed reimbursement standard and further reducing the ability of independent community pharmacies to continue serving patients.

"The best way to lower health costs associated with prescription drugs is through the appropriate use of generic drugs and greater adherence, which helps prevent complications, "Hoey added. "Medicaid patients rely on clinically-trained pharmacists for counseling, which could be jeopardized if CMS doesn't ultimately arrive at a more practical approach."

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 23,000 independent community pharmacies. Together they represent a $93 billion health care marketplace, dispense over 37% of all retail prescriptions, and employ more than 315,000 people, including 62,400 pharmacists. Independent community pharmacists are readily accessible medication experts who can help lower health care spending. They are committed to maximizing the appropriate use of lower-cost generic drugs and reducing the estimated $290 billion that is wasted annually by improper medication use. To learn more go to www.ncpanet.org or read NCPA's blog, The Dose, at http://ncpanet.wordpress.com.

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