The federal government’s proposed rule on Medicaid pharmacy reimbursement using the average manufacturer price (AMP) model is being closely examined by the National Association of Chain Drug Stores.

NACDS is reviewing the proposal with its members and will provide comments to the Centers for Medicare and Medicaid Services (CMS), said president and chief executive officer Steve Anderson.

“However, NACDS has long expressed concerns with using AMP as a basis for pharmacy reimbursement, as it is not a price paid in the marketplace but instead is a benchmark to determine manufacturer rebates in the Medicaid program," he stated.

According to a CMS statement accompanying the regulation’s release late last month, the proposal will save taxpayers and states an estimated $17.7 billion over five years. The rule, implementing provisions of the 2010 health care reform law, “will increase transparency in drug pricing and ensure taxpayers and states are not overpaying for prescription drugs,” the statement said.

Acting CMS administrator Marilyn Tavenner added that the proposal “puts in place simple measures that will cut costs … and benefit consumers.”

The statement says the regulation aligns reimbursement rates to better reflect the prices that pharmacies pay for drugs, increases manufacturer rebates, and provides rebates for patients in Medicaid managed care organizations.

The language in the health reform law that led to the new proposed rule is a direct result of a multiyear effort to defend pharmacy patient care, according to NACDS.

With the National Community Pharmacists Association, NACDS in November 2007 filed a lawsuit that challenged CMS’ 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. NACDS and NCPA withdrew their lawsuit in December 2010 after CMS formally withdrew provisions of the AMP rule related to the definition of AMP, calculation of federal upper limits (FULs) and definition of “multiple source drug.”

In the past few months CMS has released four draft lists of FULs. NACDS says these pose concerns for community pharmacy since there is no regulatory process in place to ensure their accuracy because CMS withdrew the AMP rule in 2007. Without a governing process in place, NACDS believes that draft FULs should not be published before a final AMP rule is effective.

NACDS members have found that many of the draft FULs are below the costs to acquire these products from a wholesaler. Below-cost product reimbursement, coupled with woefully inadequate dispensing fees, may threaten Medicaid beneficiaries’ access to prescription drugs and pharmacy services.

NACDS and NCPA commended Sens. Kent Conrad (D., N.D.) and Olympia Snowe (R., Maine) and 12 of their colleagues for a bipartisan effort to express serious concerns about the FULs.

“In publishing three draft lists of Medicaid drug FULs, CMS has provided states with a potential unofficial standard for setting state maximum allowable costs (MACs),” the senators wrote in a letter to CMS. “Specifically, pharmacists believe that if states were to implement MACs based on the CMS draft FUL lists, pharmacies could see reduced reimbursement for selected generic drugs in the range of 30% to 60% of acquisition costs. Cuts of this magnitude could create a disincentive to dispense generic drugs, which is exactly the opposite of what we should be trying to achieve as we seek to control health care costs.”

The other senators signing the letter were Daniel Akaka (D., Hawaii), Michael Bennet (D., Colo.), Roy Blunt (R., Mo.), Bob Casey (D., Pa.), Thad Cochran (R., Miss.), John Hoeven (R., N.D.), Tim Johnson (D., S.D.), Amy Klobuchar (D., Minn.), Pat Leahy (D., Vt.), Debbie Stabenow (D., Mich.), Jon Tester (D., Mont.) and Roger Wicker (R., Miss.).