The Centers for Medicare & Medicaid Services (CMS) is relying on flawed average manufacturer price (AMP) data to calculate new caps on Medicaid pharmacy reimbursement —  known as federal upper limits (FULs) — for multiple-source generic prescription drugs, according to the National Community Pharmacists Association.


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NCPA questions CMS calculations for FULs

October 20th, 2011

ALEXANDRIA, Va. – The Centers for Medicare & Medicaid Services (CMS) is relying on flawed average manufacturer price (AMP) data to calculate new caps on Medicaid pharmacy reimbursement —  known as federal upper limits (FULs) — for multiple-source generic prescription drugs, according to the National Community Pharmacists Association.

NCPA said Wednesday that it sent a letter this week to Cindy Mann, director of CMS' Center for Medicaid an State Operations, calling on the agency to revamp the proposed FULs, which the association noted would result in "potentially devastating cuts" in Medicaid reimbursement and threaten patient access to pharmacy care.

"The newly proposed limits published by federal Medicaid officials would reimburse independent community pharmacies at rates that are below even the pharmacy's acquisition costs for hundreds of products," NCPA chief executive officer B. Douglas Hoey said in a statement.

"The dispensing fees paid to pharmacies by Medicaid and virtually every health plan are already well below a pharmacy's cost of dispensing. So it's critical for pharmacies to be reimbursed fairly for the generic drugs they dispense, along with expert medication advice," Hoey explained. "If implemented as proposed, these caps would endanger patient access to care by forcing many independent community pharmacists to either curtail their participation in Medicaid or to leave the program altogether in order to avoid dramatic financial losses."

In the letter, NCPA pointed out that the AMP data used by CMS doesn't accurately reflect acquisition costs for community pharmacies and that, even at the reimbursement baseline established in the Affordable Care Act (175% of the weighted average AMP), hundreds of products on CMS' proposed list have FULs that are below an independent pharmacy's acquisition costs.

"In addition, the ACA [Affordable Care Act] criteria requires FULs be set with AMPs of multiple-source products that 'are available for purchase by retail community pharmacies on a nationwide basis,' which does not appear to be the case with the newly proposed CMS list," NCPA stated.

The association also listed the following concerns and recommendations in the letter:

• Inconsistency among drug manufacturer practices may contribute to the below-market FULs. NCPA said the lack of guidance from CMS to manufacturers in terms of defining AMP has led to widely varying manufacturer practices in calculating AMP values, which in turn may be resulting in the inadequate FULs proposed by CMS. The association called for the new AMP regulation to be finalized before any AMP values are used to set FULs.

• Insufficient manufacturer data. The FULs are based on one month's AMP data, without regard to the required "smoothing process" to help avoid significant fluctuations that could occur from month to month, according to NCPA.

• Independent pharmacies have higher drug acquisition costs, which should be recognized by CMS. NCPA noted that independents' acquisition costs are often 25% to 50% higher than those of publicly held chain pharmacies, and the ACA gave CMS the flexibility and authority to set the FULs at a higher rate to account for that difference and help preserve patient access in underserved rural and inner-city communities.

• CMS should fully resolve these and other issues before publishing its final, revised FULs. The publication by CMS of below-market reimbursement caps, such as those initially proposed, could result in more health plans adopting a flawed reimbursement standard and further reducing the ability of independent pharmacies to continue serving patients, NCPA said.

"The best way to lower health costs associated with prescription drugs is through the appropriate use of generic drugs and greater adherence, which helps prevent complications," Hoey added. "Medicaid patients rely on clinically trained pharmacists for counseling, which could be jeopardized if CMS doesn't ultimately arrive at a more practical approach."

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