The National Association of Chain Drug Stores and the National Community Pharmacists Association have expressed concerns about "fair and accurate" Medicaid pharmacy reimbursement after the Centers for Medicare & Medicaid Services (CMS) published draft, three-month rolling average federal upper limits (FULs).


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NACDS, NCPA cite Medicaid reimbursement flaws

July 16th, 2013

ARLINGTON, Va. – The National Association of Chain Drug Stores and the National Community Pharmacists Association have expressed concerns about "fair and accurate" Medicaid pharmacy reimbursement after the Centers for Medicare & Medicaid Services (CMS) published draft, three-month rolling average federal upper limits (FULs).

NACDS and NCPA said Monday that they have sent a joint letter to CMS explaining that with the upcoming expansion of Medicaid services in the Affordable Care Act, pharmacy dispensing fees should be reviewed and adjusted to account for the full cost of providing prescription drugs to Medicaid patients.

The two pharmacy trade groups noted that if the draft sets of FULs are implemented, Medicaid patients could lose access to community pharmacies and, in turn, their prescription medications, potentially leading to negative health consequences and hiked Medicaid costs for other health interventions.

"NACDS and NCPA have reviewed all of the draft FUL lists published by CMS, including the draft three-month rolling average FUL list, and we continue to have numerous concerns with the use of average manufacturer price (AMP) as a pharmacy reimbursement benchmark," the associations stated in the letter. "In addition to the significant reductions in pharmacy reimbursement that would result from implementation of FULs based on AMP, we continue to see great variability in FULs from month to month, the tendency of FULs to appear and disappear from draft FUL lists, the lack of correlation between AMP and pharmacy acquisition cost, and the prevalence of FULs that have been calculated in a manner that is inconsistent with the requirements of the Affordable Care Act (ACA)."

NACDS and NCPA endorsed CMS' efforts to control the volatility of AMPs by calculating FULs based on a three-month rolling average of AMP. However, the groups pointed out that the use of a 12-month rolling average to reckon FULs would provide "additional smoothing" by reducing month-to-month variability, resulting in greater predictability for pharmacies — especially those that serve a high percentage of Medicaid patients.

"NACDS and NCPA advocate for the use of a rolling average to calculate FULs. However, CMS appears to be suggesting that multiple FUL lists would be calculated each month, using different factors, and states could select an FUL list to be used for pharmacy reimbursement, as long as total pharmacy reimbursement 'remains within the FUL in the aggregate,' " the associations explained in the letter. "If CMS elects to calculate and publish multiple FULs lists, additional clarity around the use of FUL lists will be necessary."

The letter also reiterated NACDS' and NCPA's long-held concern about the use of AMP as a pharmacy reimbursement benchmark because of the inconsistencies in how it is calculated. Pharmacy reimbursement, they noted, encompasses multiple components, including reimbursement for drug product, for the cost of dispensing a drug to a Medicaid patient and for other professional services, such as medication therapy management
and immunizations.

"We applaud CMS for its actions to ensure that states that move to a benchmark based on
pharmacy acquisition costs base total pharmacy reimbursement on comprehensive dispensing fee studies. This has been critical to ensuring that pharmacies are not reimbursed below the cost to acquire and dispense prescription medications to Medicaid patients," the groups explained. "We believe a similar policy is needed in the case of AMP-based FULs. 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."

According to NACDS and NCPA, there continue to be hundreds of drugs where the FULs are lower than the current market-based acquisition costs for community pharmacies.

"Given that state dispensing fees are generally paying pharmacies a fraction of their actual
dispensing costs, pharmacies continue to need to make some 'margin' on product reimbursement to remain in business. This is especially true since Medicaid is not 'marginal' business to the average community pharmacy, and the number of Medicaid patients is expected to increase significantly in 2014," the associations said. "Paying pharmacies at only 175% weighted average AMP — or lower as many states will do — is simply insufficient to cover pharmacy costs of purchasing and dispensing Medicaid prescriptions."

In November 2007, NACDS and NCPA filed a lawsuit that challenged CMS' prior implementation of the AMP model in the Deficit Reduction Act of 2005. In December 2007, a federal judge issued a preliminary injunction against that rule. The two associations withdrew their lawsuit in December 2010 after CMS formally pulled provisions of the AMP rule related to the definition of AMP, calculation of FULs and the definition of "multiple source drug."

"We continue to believe strongly that CMS should not publish AMP-based FULs until a final regulation is issued and at least several months of AMP data have been collected and analyzed by CMS," NACDS and NCPA stated in their letter. "We urge the final regulation be published as soon as possible so that all affected parties can better understand how AMP-based reimbursement will affect them."

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