Pharmacy appeals to HHS in wake of AWP ruling

9/28/2009

Stung by an anticipated but still painful defeat in federal court, chain and independent pharmacy groups have turned to the Obama administration for help in turning aside what could be a new and imminent round of cuts in Medicaid prescription payments.

Three national pharmacy groups are asking the nation’s top federal health official for help in their bid to stave off the anticipated cuts, following an appeals court ruling that upheld the settlement earlier this year of a longstanding dispute over the wholesale prices paid for prescription drugs. The expected cuts in reimbursement could impact the rate at which Medicaid pays pharmacies to dispense more than 1,400 branded and multisource prescription drugs after publication of new drug-pricing data began Sept. 26, as set out in a court-approved settlement of the pricing dispute.

On Sept. 8, the National Association of Chain Drug Stores, National Community Pharmacists Association and National Association of State Pharmacy Associations took their case to the Department of Health and Human Services. Their appeal, in the form of an urgent, hand-delivered letter to HHS secretary Kathleen Sebelius, came in the wake of a federal court ruling handed down Sept. 3.

In that ruling, the U.S. Court of Appeals for the First Circuit rejected an appeal from retail pharmacy advocates and upheld a lower court’s settlement of a three-year-old class-action lawsuit filed by a group of health plan sponsors against two drug data publishers, First DataBank and MediSpan, along with drug wholesalers.

The plaintiffs—which included union pension funds, teachers’ unions and other health plan sponsors—alleged that the publishers and wholesalers illegally conspired to inflate the markup between wholesale acquisition cost and average wholesale price from 120% to 125% of WAC. “This resulted in higher costs to patients and third-party payers,” NCPA acknowledged earlier this year.

Under terms of the settlement, both publishers agreed to reduce the published AWP figures used in pharmacy reimbursement contracts, beginning with new drug pricing data released Sept. 26. But without intervention by the HHS secretary, the pharmacy groups warned in their appeal to Sebelius, the reduction “will result in significant cuts to the pharmacy reimbursement rates in all states that base their reimbursement methodology on AWP.”

“We are concerned that many state Medicaid programs are not acting to make changes to their pharmacy reimbursement rates to compensate for a change in the way that the pharmacy reimbursement benchmark…is being calculated and reported,” noted NACDS, NCPA and NASPA. “This AWP benchmark is the one which is most frequently used by state Medicaid programs to reimburse pharmacies for most single-source drugs and some multiple-source drugs.”

Added the letter, “We strongly urge you to please act now to instruct states to modify their Medicaid pharmacy reimbursement rates such that access to pharmacy services can be maintained.” If states do not adjust their payment rates, noted the pharmacy groups, “reimbursement will be artificially reduced by about 4% below the states’ best estimate of pharmacies’ actual acquisition costs.”

The court’s affirmation of the settlement created what NACDS president and CEO Steve Anderson called a “fragile situation” regarding pharmacy reimbursements. In a statement that seems to mingle resignation over the ruling with a determination to shift the battle to other venues outside the courtroom, Anderson vowed to continue pressing the fight to protect pharmacy reimbursement levels.

“For three years, the National Association of Chain Drug Stores and allied organizations have been successful through legal action in preventing reductions to published average wholesale prices for prescription drugs,” he noted. “This has prevented subsequent reductions in reimbursement to pharmacies for the patient care they provide, and thus has been a three-year campaign that was worth waging on behalf of pharmacies and the patients they serve.”

“The appellate court’s ruling…that now allows the reduction of AWPs does not signify the end of the campaign, but rather shifts the urgency for action to other arenas,” Anderson added. “The fact remains that reduction of AWPs threatens to cut pharmacy reimbursement for drugs below their costs—an untenable position for any healthcare provider and for any business. Fortunately, some private payers are taking steps to remedy this situation by making appropriate reimbursement adjustments. Likewise, we renew our call today to state Medicaid programs to take the only viable course for patient care and to address the flawed reimbursement that the reduced AWPs will create,” Anderson said.

In an interview, NACDS chief legal counsel Don Bell agreed “the decision was disappointing.” However, he added, “we have been planning for this for years. We and our allied organizations were successful in putting off the AWP reductions for three years…so at least we were able to give retail pharmacies more time to prepare,” Bell told Drug Store News.

Bell agreed that one of pharmacy leaders’ biggest concerns is the effect the new 120% pricing formula will have on Medicaid prescription payments. But the impact the settlement will have in the private-payer marketplace “depends on how each of the contracts are written with the payers,” he added. At this point, Bell added, “we’re looking at all our options” as the group mulls a variety of actions to offset the impact of the lowered AWP formula on Medicaid payments. That includes direct appeals at the state level and “the potential for some sort of legal action.”

On a more positive note, the court-ordered injunction against CMS’ long-standing plan to impose a new AMP-based payment model on retail pharmacies dispensing generic drugs to Medicaid beneficiaries is still in effect. “That injunction remains in place,” said Bell, while the agency strives to come up with an acceptable definition of a multiple-source drug for purposes of setting an average market price on which to base generic drug reimbursements.

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