Pharmacy groups on warpath over AMP

July 23, 2007

Pharmacists react to final rule for average manufacturers price rule for Medicaid generic drug reimbursement.

The Centers for Medicare & Medicaid Services released the final version of its long-awaited average manufacturer price rule to universal condemnation from pharmacy organizations. Speaking for many in the industry, Steven C. Anderson, president and CEO of the National Association of Chain Drug Stores, commented: "This final rule issued by CMS is simply unacceptable for community pharmacy and the Medicaid patients we serve."

Other pharmacy groups have voiced the same sentiments. The National Community Pharmacists Association expressed outrage at the rule's final formulation. John Rector, NCPA senior VP and general counsel, told Drug Topics the final rule "might be worse than the proposed rule." The American Pharmacists Association worried that with the rule "pharmacists across the country may be penalized for serving Medicaid patients."

"They are not doing right by pharmacy," agreed Crystal Wright, spokeswoman for the Association of Community Pharmacists Congressional Network (ACP*CN). "It is very perplexing, very maddening."

While the DRA mandated that reimbursement be established at 250% of AMP, it left open questions of how precisely CMS would determine the data to include in AMP calculations and how it would define the retail class of trade. The proposed rule, released in late December, received more than 1,600 comments as well as letters of concern from more than 250 senators and representatives.

The proposed rule contained several elements that were particularly troubling to pharmacists. CMS included mail-order pharmacies and nursing homes in its definition of the retail class of trade. In addition, the proposed rule originally included discounts and rebates that are paid to pharmacy benefit managers in its AMP calculations.

In comments to CMS, pharmacists argued that PBM rebates would artificially lower the AMP price below their acquisition costs. According to a study by the Government Accountability Office, the rule would reimburse pharmacists on average 36% below their cost of acquisition.

While the final rule addressed some of these issues, pharmacy groups worry the changes may ultimately be rendered meaningless. CMS removed nursing homes from its definition of retail pharmacy but added home infusion and specialty pharmacies. "It's like a shell game," griped John Coster, VP of policy and programs at NACDS.

It is also unclear whether PBM rebates will be included in AMP data. Even though the final rule now excludes some PBM rebates, it does allow rebates, discounts, and other price concessions that are "associated with" sales of drugs to retail pharmacies. The vagueness of the provision may provide a loophole for manufacturers to include PBM rebate data.

Perhaps most frustrating for pharmacy advocates is that much still remains up in the air with the new rule. CMS left its definition of AMP vague and invited comments. "The biggest surprise was that it still lacks a clear definition of AMP. Why all this secrecy?" asked Wright. "We feel that we are still at ground zero."

The Pharmaceutical Care Management Association, a PBM trade association, expressed satisfaction that the final rule removed PBM rebates but echoed the concern of pharmacy groups. "We remain concerned that mail-service and specialty pharmacy are included in the definition of retail class of trade since neither dispenses to the 'general public,'" the group announced in a written statement.

The delay in the rule's publication pushes back the timetable released by CMS less than a month ago. The rule will become effective Oct. 1, and CMS will publish new FULs for generic drugs in December based on the October AMP data. The new FULs will become effective in January 2008 and will be updated monthly based on manufacturers' monthly AMP reports.

Key elements of the final AMP rule