Medicaid Drug Reimbursement Rule Faces Opposition
Representatives for pharmacies and pharmacy benefit managers have begun to fight a rule proposed by CMS that would revise the formula used to calculate Medicaid reimbursements for generic medications, the Wall Street Journal reports.
The rule, mandated under the 2005 Deficit Reduction Act, would save Medicaid an estimated $8.4 billion over five years. Under the rule, the formula that CMS uses to calculate Medicaid reimbursements for generic medications for the first time would include an "average manufacturer price" that accounts for mail-order prices and rebates to PBMs.
However, retail and independent pharmacies, where most Medicaid beneficiaries purchase their medications, do not receive such rebates and discounts.
According to a report from the Government Accountability Office, the rule would reduce Medicaid reimbursements to levels that would not cover the cost of many generic medications or the cost to dispense the treatments. The report found that the rule would reduce Medicaid reimbursements to 3% less than the amount pharmacies pay wholesalers for generic medications.
"Pharmacists question why they're being asked to bear those cuts -- which make up more than 90% of the proposed Medicaid cuts over the five-year period -- when pharmacy expenses are only 3% of the total Medicaid budget," the Journal reports. The rule "could hit particularly hard at independent pharmacies," where the prescription drug sales on average account for as much as 92% of revenue, according to the Journal.
In a survey of independent pharmacists, 86% said that they might end participation in Medicaid as a result of the rule.
Michael Polzin, a spokesperson for Walgreen, said that reduced Medicaid reimbursements "can reduce the incentive to dispense generics" and might prompt increased use of brand-name medications, which "can have the effect overall of costing Medicaid more money than they're saving."
Mark Merritt -- president of the Pharmaceutical Care Management Association, a trade group for PBMs -- said, "PBMs rely on chain and independent pharmacies alike to provide access to prescriptions for their government and commercial clients and would not want to see that access put in jeopardy."
Leslie Norwalk, acting administrator of CMS, said that the GAO report did not use a single definition of AMP. "Without a definition, the numbers are meaningless," Norwalk said. She added that CMS has begun to review the more than 1,000 public comments submitted on the rule. "We appreciate the importance of generic drugs and state Medicaid programs and want to encourage their use," Norwalk said.
CMS by law must implement the rule by July 1. Forty-six Democratic and Republican senators earlier this month sent a letter that asked CMS to revise the rule (Merrick/Zhang, Wall Street Journal, 3/28).