The National Association of Chain Drug Stores has submitted comments to the Centers for Medicare & Medicaid Services (CMS) regarding its draft federal upper limit (FUL) list.

National Association of Chain Drug Stores, NACDS, federal upper limits, Medicaid, pharmacy reimbursement, FUL, Centers for Medicare & Medicaid Services, CMS, FULs, Cindy Mann, average manufacturer price, AMP, dispensing fees,

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NACDS gives take on proposed Medicaid reimbursement caps

October 21st, 2011

ALEXANDRIA, Va. – The National Association of Chain Drug Stores has submitted comments to the Centers for Medicare & Medicaid Services (CMS) regarding its draft federal upper limit (FUL) list.

NACDS said Friday that it has sent a letter to CMS' Cindy Mann, deputy administrator and director of the Center for Medicaid, CHIP and Survey & Certification, to express its concerns about how caps for Medicaid pharmacy reimbursement are calculated, notably using the average manufacturer price (AMP) measure. The association pointed out that consideration of FULs ultimately affects Medicaid patient access to prescription drugs and other pharmacy services.

"We offer these comments in the spirit of implementing a Medicaid pharmacy reimbursement policy that maintains the strong link between chain pharmacies and Medicaid patients," NACDS wrote in the letter. "In our comments, we focus on the following issues: AMP is an inaccurate benchmark for pharmacy reimbursement, lack of consistent AMP reporting by manufacturers, whether to calculate a federal upper limit, amount of federal upper limit, and accurate dispensing fees are critical."

NACDS said that dating back to the enactment of the Deficit Reduction Act of 2005 (DRA) and the issuance of rules by CMS in 2007 to implement that law, the association has pushed for patients' medication access and to prevent unreasonable — and even below-cost — reimbursement to pharmacies for generic prescriptions filled through Medicaid. NACDS and the National Community Pharmacists Association won a preliminary injunction in federal court in 2007 to block CMS' approach to pharmacy reimbursement with the AMP model, and CMS eventually withdrew all of the contested rules.

The AMP-based reimbursement model created by the DRA was modified by provisions in the Patient Protection and Affordable Care Act health care reform law and other legislation, NACDS said. And besides the FUL list, CMS soon is expected to issue a proposed rule to implement pharmacy Medicaid reimbursement according to AMP, the association added.

"NACDS continues to have significant concerns with [AMP] as a basis for pharmacy reimbursement," NACDS said in its letter. "AMP is not a price paid in the marketplace. Instead, it is a benchmark to determine manufacturer rebates in the Medicaid program."

The association noted in its comments, "After a comprehensive analysis, one NACDS member company found that more than half of the draft federal upper limits were below the pharmacy's cost to acquire these products from a wholesaler. Other NACDS member companies have reported similar findings."

Also undermining this approach to pharmacy reimbursement, NACDS pointed out in the letter, is the fact that "the absence of any specific agency guidance or regulation means there is no clear regulatory standard for manufacturers, which leads to great variability in how AMPs are calculated and reported to CMS."

NACDS also raised the issue of the applicability of the published FULs given the current absence of a new AMP rule. "Because CMS has withdrawn the 2007 AMP rule, including the sections pertaining to the calculation of FULs, there is no regulatory process in place to govern calculation of federal upper limits," the association wrote. "As a result, NACDS believes that the draft FULs, calculated without regulatory guidance and seemingly inaccurate, should neither be made available for nor used as a basis for pharmacy reimbursement. Furthermore, no further draft FUL lists should be published before a final AMP rule is effective. At the completion of rulemaking, CMS should again issue a draft FUL list for public review and comment."

In the letter, NACDS also described instances in which CMS will need to make adjustments to FULs, in accordance with the new health care reform law, to foster workable reimbursement.

"The Affordable Care Act provides CMS with the authority to calculate federal upper limits at 'no less than' 175%," NACDS explained. "The 'no less than' language in the ACA is critical. While Congress created a floor of 175% for calculating FULs, it clearly recognized that CMS would require flexibility in the level of multiplier in order to maintain patient access to prescription medications. Congress did not limit the ability of CMS to increase the multiplier to calculate FULs but rather provided broad authority. Based on analysis of the draft FUL list, it appears that at least initially, CMS may need to increase the multiplier for calculating all FULs."

NACDS, too, stressed the importance of appropriate dispensing fees. "We urge CMS to make clear to states that in order to maintain patient access to pharmacies, dispensing fees must be reviewed and adjusted to reflect no less than the true cost of dispensing prescription medications to Medicaid patients."

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