House lawmakers promote new bill to overhaul Medicaid payment rule

WASHINGTON —A bill to overhaul the federal government’s new and controversial Medicaid prescription payment plan for pharmacies is gaining ground in Congress after a strong bipartisan send-off in late July.

The newly authored Patient Access to Medicaid Generic Prescription Drugs Act of 2007 has won the endorsement of the national organizations representing both chain and independent pharmacy. For drug retailers, the bill could represent the last, best hope for legislative relief before the new Medicaid pharmacy payment regulations take full effect on Jan. 30, 2008.

Reps. Nancy Boyda, D-Kan., and Jo Ann Emerson, R-Mo., are acting as cosponsors of the bill. Its aim: to address what its authors contend are unfair disparities in the way the Medicaid program will pay pharmacies for dispensing medications under the program.

The introduction of the Boyda/Emerson bill follows the release of the final rules establishing new Medicaid payment guidelines for generic drugs. The new guidelines, issued July 6 by the Centers for Medicare & Medicaid Services, set a new federal upper limit for what the government will pay states in matching funds for generics dispensed to Medicaid patients. The regulations also redefine the price of those drugs, based on the average manufacturer’s price they command in the open market, as determined by CMS.

As such, the new payment model has met with withering criticism and intense opposition from the National Association of Chain Drug Stores, the National Community Pharmacists Association and the pharmacy division of the Food Marketing Institute. Pharmacy leaders fear the new CMS model will severely undercut profit margins and eliminate incentives for dispensing generics by basing reimbursements on a broadly defined definition of AMP that includes prices paid by mail-order pharmacies, pharmacy benefit managers and other non-retail entities that generally pay less for prescription drugs. Those lower prices—combined with rebates and other purchasing incentives available to non-retail drug purchasers—will skew the calculations that establish the AMP of a multisource drug, opponents said.

The result, according to retail pharmacy advocates, will be FUL on pharmacy reimbursements that are below the cost of the drugs for many drug store operators.

“This is an absolute disaster,” warned NCPA’s vice president of government affairs, Charles Sewell. He noted that 10 percent of NCPA’s independent pharmacy members—some 2,300 pharmacies—depend on Medicaid for 50 percent or more of their prescription business.

“Obviously, no business can stay in business very long if they’re operating at a loss,” Sewell added.

In a press briefing July 24, Boyda and Emerson joined with Sewell and Paul Kelly, vice president of government affairs for NACDS, to oppose CMS’ new pharmacy reimbursement plan and to promote their alternative payment formula for Medicaid prescriptions. They assert their bill would redefine the AMP-based benchmark to more accurately reflect pharmacy acquisition costs. It also would exclude sales from mail-order facilities and PBM price concessions and rebates that aren’t provided to retail pharmacy, as well as add new incentives to drive generic utilization to boost government savings.

Both lawmakers characterized the new AMP regulations as an assault on community pharmacy and a step backward in the long campaign by federal, state and private health plan sponsors to reduce health costs through the use of generic drugs, which cost far less on average than their branded counterparts. CMS’ payment model, Boyda asserted, also encourages a shift among Medicaid patients to mail-order pharmacies at the expense of the community pharmacist.

“Over my dead body are we going to do this,” Boyda warned. “They’re not going to the root of the problem [of rising health costs in Medicaid] by going after name-brand drugs, but by going after the people dispensing the drugs and taking care of our rural communities.”

Emerson, who represents a rural and generally very poor region in Missouri, characterized the issue of Medicaid pharmacy reimbursement as “critical to the success of our rural counties.”

“For many of my constituents, their health care is their pharmacist,” Emerson said. “Truly their pharmacist is their front-line professional, and it is critical that those pharmacists remain in their job site. This really strikes at the heart of what is right and fair in the health care industry.”

By the time it was introduced, the Boyda/Emerson bill already had drawn some 30 co-sponsors in the House, and many more lawmakers are ready to lend their support, Boyda noted.

Among other things, the legislation would replace CMS’ AMP-based formula with a new Medicaid payment model for pharmacies based on what the bill’s authors called “RAC,” or retail acquisition cost.

“RAC makes much more sense because it’s based on the retail level price, instead of the manufacturer level,” Emerson said.

“The CMS rule desperately needs a fix, and a fix requires ideas and committed champions,” noted NACDS president and chief executive officer Steven Anderson. “Rep. Boyda rallied the support of House colleagues in a letter to CMS prior to its release of the final rule. She has worked diligently to craft a remedy for the Deficit Reduction Act and its misapplication by CMS.”

“In the end, Congressional action is absolutely necessary to make possible the current level of vital pharmacy services available in low-income communities, including rural and inner-city areas,” Anderson added. “Public policy should not expect businesses to sell products below their cost, and should not create disincentives for solutions that reduce overall health care costs, including the dispensing of appropriate generic drugs.”