New Medicaid Generic Reimbursement Rates Receive Push Back

Published Online: April 18, 2014
Katie Sullivan, MA
A US Department of Health and Human Services (HHS) analysis determined that a new payment formula, which would reduce Medicaid reimbursement rates for generic prescription drugs, could save Medicaid up to $1.2 billion per year. The regulation, a mandate under the Affordable Care Act, would base generic drug reimbursement for Medicaid beneficiaries on a drug’s average manufacture price (AMP) instead of its average wholesale price (AWP). While Centers for Medicare & Medicaid Services (CMS) officials remain confident in its full implementation in July 2014, pharmacists and drug manufacturers are pushing back and asking for a 1-year extension.

“Many states will be unable to meet CMS’s expectations for changes to both drug reimbursement and dispensing fees by July 2014,” said an industry stakeholder letter. “Accordingly, to preserve beneficiary access to pharmacy services, we encourage CMS to issue guidance allowing states a 1-year transition period for implementation of the final AMP-based FULs [Federal Upper Limits] and dispensing fee changes.”

The extension would also provide states with more time to configure new dispensing fees. These fees often allow pharmacists to recover any costs lost on providing Medicaid generic drugs. They will be important if pharmacies are to maintain their effectiveness.

“Beneficiary access could be an issue if implemented as is, as many providers could refuse to dispense medications where the reimbursement falls below their cost,” said Sharon Greeson, a consultant with Compliance Implementation Services, a regulatory and standard compliance firm.

The AWP-based FULs and dispensing fee changes would address the rising costs of covering the growing Medicaid population. In fact, a Kaiser Family Foundation study found that Medicaid spending on generic drugs increased an estimated 80% between 2006 and 2010, from $2.5 billion to $4.5 billion. Controlling the costs of generics is also important for consumers, as high costs can deter them from properly adhering to drug regimens or refilling medications.

"We need to… make sure that as we manage generic reimbursement, we don't take the profits for these drugs so low, that no one wants to actually make these drugs for us," said pharmaceutical economics expert Adam Fein, PhD.

The reimbursement rates for generic drugs under Medicaid would be more than 20% below current state amounts. Although this adds to pharmacist and drug manufacturer concerns, experts maintain that an increased Medicaid patient population would balance any loses in generic drug reimbursements.

Around the Web

Pharmacists Call for Delay on New Medicaid Generic Reimbursement Rates [Modern Healthcare]

Generic Prescription Costs Skyrocket [NBC]