R.Ph.s brace for payment cutbacks from Medicaid

September 26, 2005

Community pharmacists, beware. Congress is considering ways to reduce Medicaid spending. The goal is to save $10 billion over the next five years. Among the pharmacy product payment options Congress is evaluating are average selling price (ASP), average manufacturers' price (AMP), and wholesale acquisition cost (WAC) to replace average wholesale price (AWP), which many think has been responsible for Medicaid overpaying for Rx drugs.

Community pharmacists, beware. Congress is considering ways to reduce Medicaid spending. The goal is to save $10 billion over the next five years. Among the pharmacy product payment options Congress is evaluating are average selling price (ASP), average manufacturers' price (AMP), and wholesale acquisition cost (WAC) to replace average wholesale price (AWP), which many think has been responsible for Medicaid overpaying for Rx drugs.

Speaking at the NACDS pharmacy and technology conference, held recently in San Diego, Coster told the audience that originally the Bush Administration wanted to switch to ASP plus 6% as the new Medicaid pharmacy reimbursement method. But now, it seems to be opting instead for AMP.

According to Ralph Petri, executive VP of pharmacy and logistics at Kerr Drug, community R.Ph.s need a decent margin to continue serving the Medicaid market. In his view, there are many other ways to cut costs, such as making sure patients are getting appropriate therapy, without having the reductions come from pharmacists' backs. After all, pharmacy reimbursement is only a small portion of Medicaid's total tab, he said.

J. Kevin Gorospe, the policy chief for California's Medi-Cal pharmacy program, acknowledged that there is definite pressure to move away from AWP, as can be seen from the recent suit the state's attorney general filed against many brand drugmakers for allegedly overcharging Medicaid based on AWP.

Jason Reiser, TEVA Pharmaceuticals USA's director of state government affairs, advocated generic substitution as the way to hold down costs. For every 1% increase in generic utilization by Medicaid, there is $475 million worth of savings, he noted. To encourage generic dispensing, he went on, financial incentives should be created, such as eliminating co-pays on generics.

Speaking from the perspective of wholesalers, Connie Woodburn, senior VP of professional and government relations for Cardinal Health, said her company is very concerned about the welfare of its customers-pharmacies. Cardinal Health has six guiding principles for measuring any type of Medicaid reform:

Irrespective of whether an AMP or ASP system is ultimately selected, Coster stressed that if the feds want to reduce Medicaid payment for drug products, pharmacists must be compensated on the dispensing fee side, since they need a reasonable return to survive. He urged pharmacists in attendance to call the Capitol switchboard at (202) 224-3121 to let their views be known.