The Centers for Medicare & Medicaid Services (CMS) has published a fourth round of draft federal upper limits (FULs) for Medicaid generic drug reimbursement, but the proposed levels still fall short for community pharmacies, according to the National Community Pharmacists Association.


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NCPA: Medicaid draft FULs come up short again

January 26th, 2012

ALEXANDRIA, Va. – The Centers for Medicare & Medicaid Services (CMS) has published a fourth round of draft federal upper limits (FULs) for Medicaid generic drug reimbursement, but the proposed levels still fall short for community pharmacies, according to the National Community Pharmacists Association.

NCPA this week sent a letter to Cindy Mann, director of the Center for Medicaid and CHIP Services, noting that the latest list of draft FULs published by CMS on Jan. 17 would reimburse independent pharmacies below their acquisition cost on hundreds of generics, or more than a third of the list.

"In our analysis of the fourth draft FUL list, 36% of the FULs were lower than small pharmacies' acquisition costs, while 64% were above the acquisition costs. As we have said before, based on our experience, most states will reimburse less than the FULs. Therefore, it cannot be assumed that states will maintain the reimbursement at the FUL for those products whose FULs are above pharmacy acquisition costs, offsetting the loss from those that are not," NCPA stated in the Jan. 25 letter.

"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," the association pointed out.

Medicaid typically represents about 15% of the average community pharmacy's revenue and, for some rural pharmacies, can account for up to half of their sales, according to NCPA.

"Medicaid is not 'marginal' business to the average independent pharmacy, and the number of Medicaid patients is expected to increase significantly in 2014. Paying pharmacies at only 175% weighted average AMP [average manufacturer price] — or lower as many states will do — is simply insufficient to cover pharmacy costs of purchasing and dispensing Medicaid prescriptions," NCPA explained in the letter.

"This argues for CMS to set a higher FUL for independent pharmacies which, according to this report, have higher acquisition costs than publicly traded chains," the association continued. "The statute requires that CMS set the FUL at 'no less than' 175% of the weighted AMP. However, it implicitly grants the secretary [of Health and Human Services] the flexibility and authority to set the FULs at a higher rate that recognizes the variance in acquisition cost by small community pharmacies as compared to large chain pharmacies."

NCPA added that the letter reiterates issues previously raised by the association as well as by more than 50 senators and congressmen and the National Association of Chain Drug Stores.

"We again urge CMS not to publish the FUL list until a final AMP regulation is public. These draft FUL lists ... demonstrate how precarious it is to use AMP as a reimbursement benchmark," NCPA stated. And as CMS works to develop a National Average Drug Acquisition Cost (NADAC) database, it needs to make sure that FULs aren't set lower than the NADAC, the association said.

Earlier this month, NCPA and NACDS applauded a group of senators for their efforts in questioning draft FUL lists for Medicaid pharmacy reimbursement recently published by CMS. ""Cuts of this magnitude could create a disincentive to dispense generic drugs," the lawmakers wrote in a letter to the agency.

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