Healthcare Business News

Reform Update: Pharmacists call for delay on new Medicaid generic reimbursement rates

By Virgil Dickson
Posted: April 15, 2014 - 4:00 pm ET

Pharmacists and drug manufacturers are pushing the CMS for a one-year transition period before states attempt to implement a new formula mandated under the Patient Protection and Affordable Care Act that will significantly trim Medicaid reimbursement rates for generic drugs.

Last August, HHS' Office of the Inspector General compared existing state Medicaid programs' generic prescription reimbursement limits with the new limits mandated by the ACA and found that on average, the new federal reimbursement limits are 22% below the current state amounts and could save Medicaid up to $1.2 billion per year.

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In November, CMS notified states that they would be expected to implement the updates to the formula by July 2014. A coalition of industry stakeholders sent a letter April 9 to HHS Secretary Kathleen Sebelius, asking that there be a one-year transition period, which would push the implementation to sometime in 2015.

They argued that states are not ready to make such a quick transition, especially since adopting the new formula would in some cases require legislative or regulatory changes. They also wanted to give states more time to come up with new dispensing fees, which is what a pharmacy charges for providing professional services such as patient counseling, monitoring drug therapy, providing drug information to physicians, and dispensing the drug to customers. On average, these fee are now $3 to $5 per prescription. They provide a profit margin for pharmacists who contend reimbursement rates may only allow them to break even on Medicaid generics.

“Beneficiary access could be an issue if implemented as is, as many providers could refuse to dispense medications where the reimbursement falls below their cost,” said Sharon Greeson, a consultant with Compliance Implementation Services, a North Carolina-based firm that helps clients with regulatory and standards compliance.

Debate in Washington about how to determine Medicaid generic reimbursements goes back at least a decade. Indeed, in 2004 a House subcommittee held hearings entitled “Medicaid Prescription Drug Reimbursement: Why the Government Pays Too Much.

“The government pays far too much for many prescription drugs under Medicaid, primarily because most states continue to use a system that is called average wholesale price, or AWP, as the basis for their reimbursement,” Rep. Joe Barton (R-Texas), who was chairing the hearing, said at the time.

The ACA altered the formula for generic drug reimbursement for Medicaid beneficiaries to be based on a drug's average manufacturer price, or AMP, versus AWP. The concept of an AMP for generics dates back to a 1990s federal statute dealing with the rebates manufacturers would pay states for drugs dispensed under Medicaid.

Between 2006 and 2010, Medicaid spending on generic drugs increased about 80%, from $2.5 billion to $4.5 billion, according to the Kaiser Family Foundation. In 2010, generic drug spending represented roughly 18% of total Medicaid drug spending, with 69% of all Medicaid prescriptions being generic.

The CMS had previously attempted to make this change in the Deficit Reduction Act of 2005, but its plan then would have led to reimbursement cuts as high as 60%.

Industry stakeholders, including the National Association of Chain Drug Stores and the National Community Pharmacists Association, were able to get an injunction stopping the change in 2007. In 2010, the ACA reintroduced the concept of basing payment on AMP but it outlined a new formula. The CMS then rescinded its former contested rule and in 2012 introduced a new proposal incorporating the health reform law's language.

The recent letter was signed by the American Pharmacists Association, Food Marketing Institute, Generic Pharmaceutical Association, Healthcare Distribution Management Association, National Alliance of State Pharmacy Associations, National Association of Chain Drug Stores and the National Community Pharmacists Association.

Florida sees big “woodwork” effect in Medicaid enrollment growth

An additional 245,000 people were added to Florida's Medicaid roster between October 2013 and the end of February, an increase of more than 8% from the same period a year earlier.

The jump occurred even though state officials have thus far declined to expand Medicaid under the Patient Protection and Affordable Care Act to residents with incomes of up to 138% of the federal poverty level.

The new enrollees are those who were previously eligible for Medicaid, but didn't know about the program and its eligibility requirements; publicity surrounding the Affordable Care Act brought them into the program. Florida is one of 10 states that accounted for more than 80% of the 3 million new Medicaid enrollees under the ACA, according to an analysis from healthcare consultant Avalere Health. It is the only state on the list that didn't expand Medicaid.

New Hampshire seeks PR support to promote expanded Medicaid

New Hampshire is on the hunt for a public relations firm to help promote its newly expanded Medicaid program.

The state expanded the program late last month to 50,000 residents. Unlike other expansion states, New Hampshire is using federal Medicaid expansion funds to buy low-income residents private coverage through the insurance exchange.

The state has released a request for proposals from PR firms to launch a comprehensive outreach and communications plan emphasizing the program's benefits to low-income residents, as well as to providers, employers, insurers, advocacy groups and local governments.

Proposals are due April 18; the state plans to award the contract by April 23. Enrollment in the program begins May 1.

Follow Virgil Dickson on Twitter: @MHvdickson

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