Medicaid AMP battle heats up as health reform effort advances

WASHINGTON With a deadline looming later this year for a big cut in Medicaid prescription reimbursements, and the shape of health reform efforts still unclear, pharmacy and healthcare groups are redoubling their efforts to reshape the Medicaid payment system and turn aside a serious threat to the economic viability of many community pharmacies.

A growing sense of urgency dominates those efforts. Spurred by congressional approval of President Obama’s federal budget for fiscal 2010 — and by alarm over the potential damage wrought by the new system for Medicaid pharmacy payments set to take effect in October — a broadly based coalition of pharmacy organizations is urgently appealing to Congress for relief.

The National Association of Chain Drug Stores, National Community Pharmacists Association and six other prescription drug supply-chain organizations co-authored a letter to Senate and House leaders May 1. The purpose: to urge the most powerful lawmakers in Congress to reform the average manufacturer price reimbursement system for generic drugs in Medicaid before the new system is set to take effect in early fall. The letter marks an effort by “all segments of the prescription drug supply chain” to speak with a united voice in urging Congress to overturn the plan by the Centers for Medicare and Medicaid Services to establish the new, controversial payment method.

Implementation of the new plan was delayed last year by congressional action until Sept. 30, 2009, and pharmacy organizations — aided by supporters in Congress — are scrambling to pass legislation that would replace CMS’ new Medicaid reimbursement plan with a more equitable payment system. “The urgency of moving quickly has become more evident with the approval of the FY2010 Budget Resolution,” the letter noted. “The budget resolution calls for the committees of jurisdiction to report healthcare reform legislation by Oct. 15, 2009 — a full two weeks after the expiration of the delay in the AMP cuts.”

Besides NACDS and NCPA, the letter’s co-authors include the American Pharmacists Association, the Food Marketing Institute, the Generic Pharmaceutical Association, the Healthcare Distribution Management Association, the National Alliance of State Pharmacy Associations and the Pharmaceutical Care Management Association. Together, those groups issued a stark warning to House and Senate leaders of both parties. “Without action before the end of the current fiscal year, Medicaid patients’ access to neighborhood pharmacies, pharmacists and affordable medications could be put at risk,” they asserted. “The AMP system will result in unsustainable cuts to pharmacy reimbursement, distortions in the prescription drug marketplace and, most important, could very well curtail Medicaid patients’ access to pharmacies and cost-effective generic drugs.

“We have written before to urge action to reform the … AMP reimbursement system for generic drugs in Medicaid, which was created under the Deficit Reduction Act of 2005,” added the letter’s authors. “These cuts were delayed under the Medicare Improvements for Patients and Providers Act last year, but only through Sept. 30, 2009. Therefore, it is imperative that Congress act this year, before Sept. 30, to prevent the AMP cuts and to permanently reform the reimbursement system for generic drugs in Medicaid.”

The change could be made, added the groups, as part of healthcare reform legislation or as a freestanding bill. “Either way,” they urged, “remedial legislative action before Sept. 30 is critical.”

Warning of what they said could be “severe” consequences if no action is taken, the coalition cited a study from PriceWaterhouseCoopers that predicts as many as 11,000 pharmacies, or 20% of the U.S. total, could be forced to close their doors if the cuts go through. “At a time when Congress is exploring ways to cover 46 million uninsured Americans, it would be a tragic mistake to put at risk 20% of the nation’s most accessible points of entry into the healthcare system,” the authors noted. “Furthermore, the current AMP reimbursement policy actually will discourage the use of affordable generic drugs, since payments will be significantly below pharmacies’ costs of purchasing the products.

“This is due, in part, to inappropriate and overly broad definitions of AMP and ‘retail class of trade’ used by [CMS] in its rule for AMP calculation,” the letter continued. “Its interpretation of these terms is flawed and does not reflect the prices paid by retail pharmacies to acquire generic medications.” The coalition also pointed out that generics account for more than 60% of all prescriptions dispensed to Medicaid beneficiaries, but less than 18% of Medicaid spending for prescription drugs. “Our nation’s health policies should encourage, not discourage, the use of the most cost-effective products and services, like generic drugs,” group leaders told lawmakers.

The AMP issue also is playing out at the state level. Last month, NACDS president and CEO Steve Anderson and Jeff Rochon, CEO of the Washington State Pharmacy Association, made a direct appeal to pharmacy consumers in that state with a guest column in The Seattle Times. In their article, the two condemned the state’s plan to cut Medicaid pharmacy reimbursements and asked consumers for their support in overturning the plan. Anderson and Rochon, along with Walgreens, have waged a legal and public information campaign to halt the proposed cuts, which they argued would make Washington's reimbursement the lowest in the nation. The two pharmacy leaders appealed to consumers to contact state legislators to express opposition to the plan.

“The consequences of this decision are deeply troubling,” wrote Anderson and Rochon. “This new cut would mean every time a doctor prescribes a brand-name medication to Medicaid patients — even when a less-expensive generic alternative is available — pharmacies would lose money. It is absurd to penalize pharmacies for providing our patients with the medication that was prescribed by their doctor,” added the two leaders.

“We in the pharmacy industry recognize the state's budgetary constraints, and we went to the legislature and the governor with a slate of alternative solutions that address the state’s budget crisis,” added the two pharmacy advocates. “We proposed ideas, such as implementing electronic prescribing programs for physicians to make patient care more efficient, and quickly converting Medicaid patients to new generic versions of brand-name medications as they become available in the near future. All told, these and other programs could save the state $90 million, far more than it gains by reducing the reimbursement on Medicaid drugs.”