Magazine article Drug Topics

Third OIG Report on Medicaid Rx Costs Still Draws Plans

Magazine article Drug Topics

Third OIG Report on Medicaid Rx Costs Still Draws Plans

Article excerpt

GOVERNMENT and LAW

A little better, but still seriously flawed. That's how pharmacists feel about a new Office of Inspector General report on how much pharmacists should be paid for dispensing to Medicaid patients.

The new report follows two others OIG had issued earlier-one on brand-name drugs, released August 2001, which pharmacy associations had asked OIG to withdraw; the other on generics, which came out this past March. The new report, which includes all drugs, found that pharmacies are purchasing pharmaceuticals at a wide range of discounts from average wholesale price, depending on what type of drug is involved. It recommended that if state Medicaid agencies continue to pay pharmacies based on AWP, they should consider offering a percentage discount off AWP for four tiers of drugs:

*Tier one covers single-source brandname drugs.

*Tier two includes innovator multipie-source drugs without federal upper limits (FULs).

*Tier three comprises non-innovator multiple-source drugs without FULs.

*Tier four provides FUL price for FUL multiple-source drugs.

OIG said that one state is already using a three-tiered system, and three states are weighing similar reimbursement methodologies. OIG also came out with percentage discount amounts off AWP for each of the four tiers (see sidebar).

"The numbers are closer to reality in terms of what the actual market is," but there is one major shortcoming, commented Stephen Schondelmeyer, Pharm.D., Ph.D., director of the PRIME Institute at the University of Minnesota College of Pharmacy. Reimbursement is based on actual acquisition cost and a dispensing fee, with no mention of a markup. Without a markup and with dispensing fees at a meager $2 or $3, pharmacists won't have enough to cover their cost of dispensing and running a pharmacy, he argued.

Similarly, John Rector, senior vp. for government affairs and general counsel of the National Community Pharmacists Association, said the report, if adopted, would put many independent pharmacists out of business. NCPA estimates that on solesource brand-name drugs alone, independents would lose close to $5 on average on each Rx dispensed. Considering that Medicaid accounts for an average 20% of its members' business, they can ill afford to take such a big hit.

Believing the OIG report is very "anti-small business" and should not be "left uninterrupted," Rector said NCPA is proposing legislation entitled "The Pharmacy Medicaid Patient and Small Business Relief Act. …

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