The Centers for Medicare and Medicaid Services (CMS) has issued a request for proposal (RFP) seeking a contractor to develop monthly national surveys of retail pharmacy prescription drug prices and ingredient costs.

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CMS lays groundwork for pharmacy pricing study

August 30th, 2010

WASHINGTON – The Centers for Medicare and Medicaid Services (CMS) has issued a request for proposal (RFP) seeking a contractor to develop monthly national surveys of retail pharmacy prescription drug prices and ingredient costs.

Published on the government contract bidding web site,, the RFP also calls for the contractor to devise an annual report that ranks the nation’s top 50 prescribed drugs and compares state Medicaid reimbursement rates for those medications to the retail prices gathered in the survey.

“The purpose of this project is to contract for the performance of a monthly nationwide survey of retail community pharmacy prescription drug prices and the generation of publicly available pricing databases,” the RFP’s statement of work reads. “These databases will afford state Medicaid agencies a valid array of covered outpatient drug prices from ingredient costs paid by retail community pharmacies to those prices available to the consumer. The state agency can use this information to compare their own pricing methodologies and payments to those derived from this survey.”

The CMS request, originally posted on the FedBizOpps site on June 30 and titled “Survey of Retail Prices, Payment and Utilization Rates, and Performance Rankings,” also seeks to have the contractor provide the retail prescription drug price and ingredient cost data from the surveys in a form that would enable it to be posted on the CMS web site.

In the RFP the agency indicates that it’s required by the Deficit Reduction Act of 2005 (DRA), which was enacted in February 2006, to establish such a survey, ranking and price comparison for Medicaid.

For the retail prescription pricing component, CMS seeks the development of nationwide survey methodology “that will result in a monthly publication of pricing databases for all covered outpatient drugs that is based on actual market transactions,” the work statement says. “This survey shall incorporate the collection and calculation of drug unit prices from all sectors of retail community pharmacies.”

Meanwhile, the ingredient cost component of the work order calls for a survey methodology that will lead to “the publication of an ingredient cost file of all covered outpatient drugs purchased by retail community pharmacies.”

The work statement further says, “The contractor shall compare ingredient costs derived from the survey to existing reference pricing used by states such as wholesale acquisition cost and average wholesale price and also to the [retail survey] prices to demonstrate potential savings.”

Retail pharmacy groups — including the National Association of Chain Drug Stores, the National Community Pharmacists Association, the American Pharmacists Association and the Food Marketing Institute — have expressed deep concerns about the CMS RFP.

In an August 6 letter to CMS, the four industry groups said the agency’s RFP goes beyond what’s called for by the DRA and the Patient Protection and Affordable Care Act of 2010 (PPACA), enacted in late March. “We are concerned that CMS’ implementation of the RSP [retail survey price] program, as described in its RFP, exceeds the requirements of both the DRA and PPACA,” the letter stated.

The groups said the RFP doesn’t reflect the PPACA’s requirement that the retail survey price be based only on sales to consumers by “retail community pharmacies” and exclude mail-order, long-term care and other non-retail pharmacy entities. The letter also asserted that CMS lacks the authority to post individual retail survey prices.

In addition, the pharmacy groups noted that they are “greatly troubled” by the CMS request for a contractor to gather and disclose the wholesale prices that retail pharmacies pay for drugs.

“We have identified no legal authority for CMS to collect and distribute pharmacy acquisition cost data,” the letter stated.

The pharmacy groups said CMS was authorized by Congress to use the average manufacturer price (AMP) — the wholesale prices paid for drugs distributed to retail pharmacies — for establishing upper payment limits on Medicaid reimbursements for certain multiple source drugs. “That statute precisely limited CMS’ collection, use and disclosure of pharmacy wholesale price data,” they noted in the letter.

According to the work statement in the RFP, CMS is aiming for a contractor to begin the monthly survey of retail pharmacy prescription drugs in November. As of the end of August, the agency’s request had drawn five interested vendors.