Pharmacy to Benefit from New Medicaid Agreement APhA:s lobbying efforts lead to victories for pharmacy. by Sara Martin ongress has adopted a five-year $236.3 billion budget package that includes a Medicaid drug rebate program and several provisions that benefit pharmacy. The law, signed on November 5, was worked out in a conference of House and Senate leaders. Under the agreement, in 1991 and 1992 pharmaceutical manufacturers will be required to offer state Medicaid programs the best price in the market or a minimum discount of 12.5% off average manufacturer prices, whichever is less. The discount will increase to 15% in 1993 and following years. In return, Medicaid will now reimburse drug manufacturers for all their products, although prior state approval may be required for certain drugs. The rebate is expected to save the federal government $1.9 billion over five years.
Benefits for Pharmacy As a result of the American Pharmaceutical Association's (APhA) strong lobbying efforts, the package also includes important provisions that will benefit pharmacy. The new budget package incorporates much of the so-called "Pryor IT" legislation, the Medicaid AntiDiscriminatory Drug Price and Patient Benefit Restoration Act of 1990, S. 3029, strongly supported by APhA. "Our legislative priorities for the 101st Congress were to seek relief for states that have experienced cuts in Medicaid reimbursement of pharmacies, win approval of federal programs that will recognize the
val ue of pharmacists' cogni ti ve services, raise the awareness of Congress of discriminatory pricing, and set the stage for the reform of this area in the 102nd Congress," said APhA Executive Vice President John A. Gans. "This act accomplishes many of those goals." In an October 29 letter to the "pharmacy community," Sen. David Pryor (D-Ark.) thanked pharmacy organizations for their support and outlined the key benefits of the legislation:. • A four-year moratorium on further reimbursement reductions. Neither the U.S. Secretary of Health and Human Services (HHS) nor state Medicaid programs are permitted to reduce pharmacy reimbursement levels from January 1, 1991, to December 31, 1994.
The new budget package furthers an APhA priority: relief for states that have experienced cuts in Medicaid reimbursement of pharmacists. • A study on reimbursement rates to pharmacists. By December 31, 1991, the HHS secretary must conduct a study of whether current pharmacy reimbursement by state Medicaid programs is adequate. The study should determine the impact current reimbursement rates have on Medicaid beneficiaries'
American Pharmacy, Vol. NS30, No. 12 December 19901725
access to drugs and pharmacy services. • Drug use review. Recognizing pharmacists' skills, a program of drug therapy screening and patient counseling for Medicaid recipients will be established. The act recognizes that the pharmacist's professional discretion is the best standard to use when determining which patients need counseling. Each state is also required to establish a State Drug Use Review Board to operate the drug utilization review (DUR) program. One-third of the members of this board must be practicing pharmacists, and onethird must be practicing physicians. • Electronic claims transfer. State Medicaid programs are given incentives to establish point-of-sale systems for Medicaid prescription claims. The federal share for implementing these systems will be increased to 90%. • Cost-effectiveness of cognitive pharmacy services. By January 1, 1995, the HHS secretary must complete a five-site pilot project on the cost-effectiveness of paying pharmacists for the cognitive or clinical services they perform, whether or not a drug product is dispensed. • Prospective DUR point-of-sale demonstration. The HHS secretary must conduct a 10-state demonstration project of the effectiveness of providing a patient's drug and medical history through the electronic claims transfer system to assist pharmacists in fulfilling patient counseling requirements. The legislation also includes a provision that allows state Medicaid programs to refuse to reimburse for 25
drugs that are tied to an exclusive distribution system. (For example, Clozaril would not have to be reimbursable because it may only be dispensed by Caremark Inc. home health care agencies.)
Reimbursement Formulas State ~edicaid programs are required to cover all single-source drugs and innovator multiple-source drugs distributed by drug manufacturers who participate in the discount program. Drugs that do not provide an "acceptable rebate" will not be eligible for reimbursement unless the drug is listed as "I-A" and the HHS secretary approves the state's recommendation that the drug is "medically necessary."
Other health care providers did not fare as well as pharmacists. The deficit reduction package calls for $34 billion in savings from Medicare providers.
rebate is the higher of AMP minus 85% or ~P minus the best price. An "additional rebate" will be added to cover any increase in AMP over the rate of inflation, as measured by the Consumer Price Index. For generic drug products, the rebates will be 10% in 1991-93 and 11 % after 1993.
Strong APhA Support Praising the package, APhA Executive Vice President Gans said, "Sen. Pryor and the other members of the conference are to be commended for their efforts to improve ~edicaid's access to fair drug prices." Gans called the inclusion of pharmacy-specific provisions "especially gratifying since they focus on the key role pharmacists play in health
care delivery. The changes that can occur as a result of these provisions will enhance the ability of the profession to more effectively serve its patients and help assure that pharmacists are properly compensated for providing those services." Other health care providers did not fare as well as pharmacists. The deficit reduction package calls for $34 billion in savings from ~edicare providers - $15.5 billion in cuts for hospital payments, $6.6 billion in cuts for physician payments, and additional cuts in payments to durable medical equipment suppliers, dialysis facilities, and clinical laboratories. Sara Martin is senior writer for American Pharmacy.
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EFFECTIVELY: Drug manufacturers are required to give ~edicaid the best price they offer other entities that buy drugs, with a maximum of 25% discount from wholesale price in 1991 and 50% in 1992. (This cap on discounts phases out in 1993 and after). For brand-name products (single-source and innovator multiple-source drug products), the minimum discount in 1991 and 1992 is 12.5% off the average manufacturer price (AMP), the price manufacturers charge wholesalers. In 1993 and after, the discount must be at least 15% off A~P. The specific formulas for brand-name products are as follows: • In 1991, the basic rebate is the higher of A~P minus 87.5% or ~P minus the best price, subject to a maximum rebate of 25% of the ~p.
• In 1992, the basic rebate is the higher of A~P minus 87 .5% or ~P minus the best price, subject to a maximum rebate of 50% of the
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• For 1993 and beyond, the basic 26
American Pharmacy, Vol. NS30, No. 12 December 19901726