Stakeholder Comment Reflect Concerns With Proposed Medicaid Drug Pricing Rule

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By Bronwyn Mixter  

In comments to the Centers for Medicare & Medicaid Services, stakeholders said they have concerns about the proposed Medicaid pricing rule for outpatient drugs, including administrative burdens associated with it, rebate provisions, and various definitions related to pricing.

The proposed rule (CMS-2345-P) on outpatient drugs was published Feb. 2 in the Federal Register (77 Fed. Reg. 5,318) (20 HCPR 201, 2/6/12). CMS said the proposal, which would use the average manufacturer price (AMP) model, would implement the Patient Protection and Affordable Care Act by increasing transparency in drug pricing and ensure that taxpayers and states are not overpaying. Comments on the proposed rule were due April 2.

Negative Impact on State Programs.

The Texas Health and Human Services Commission (HHSC) said it is concerned that the proposed regulation would be “administratively burdensome and will have a negative impact on state Medicaid programs.”

HHSC said it hopes that CMS provides states with flexibility to allow state-specific approaches to implementation of the proposed rule.

Specifically, HHSC said, it is opposed to the proposed amendment to rename and revise the definition of estimated acquisition cost (EAC) to actual acquisition cost (AAC) if it limits states to only one method for determining AAC, such as pharmacy pricing surveys. HHSC said it currently uses drug pricing information provided by drug manufacturers to determine the acquisition cost.

HHSC suggested that CMS allow states flexibility to demonstrate that their process for determining AAC is consistent with the proposed definition. “If CMS does not provide this flexibility, HHSC expects its reimbursement expenditures to increase as a result,” the commission said.

Additionally, HHSC said, it is concerned that some of the amendments may require or allow changes to rebate calculations that are retroactive to 2010. “This will impact rebate payments and collections such that manufacturers will have the burden of recalculating 2 years worth of rebates and states could potentially have to pay back rebates already collected,” HHSC said.

HHSC requested that CMS specify which of the changes to the regulations, if any, would require manufacturers or states to retroactively revise or recalculate rebate payments or collections.

Issues for Chain Drug Stores.

In its comments, the National Association of Chain Drug Stores (NACDS) highlighted several areas of concern, including the definition of AMP, retail community pharmacy, and wholesaler; when to calculate a federal upper limit (FUL); the amount of FULs; and the importance of accurate Medicaid dispensing fees.

NACDS said it is concerned about the AMP definition and the definition's lack of correlation with pharmacy acquisition costs.

“It is important to note that AMP is not a price paid in the marketplace,” NACDS said. “In fact, analysis of the weighted AMPs published by CMS along with draft FUL lists, as well as government reports, indicate AMP is not a reliable benchmark for pharmacy reimbursement.”

NACDS also urged CMS to “require states to reevaluate dispensing fees to assure that they adequately cover costs and to include specific factors on assessing dispensing fees in this rulemaking.”

Additionally, NACDS said, it is important that CMS wait until final rulemaking is completed before AMP-based FULs are used for pharmacy reimbursement. CMS has released seven draft FUL lists. The draft FULs pose concerns for community pharmacies, as there is no regulatory process in place to ensure their accuracy since CMS withdrew the AMP rule in 2007, NACDS said.

NACDS and the National Community Pharmacists Association (NCPA) in November 2007 filed a lawsuit that challenged CMS's prior implementation of the AMP model in the Deficit Reduction Act of 2005. In December 2007, a federal judge issued a preliminary injunction against that rule. NACDS and NCPA withdrew their lawsuit in December 2010 after CMS formally withdrew provisions of the AMP rule related to the definition of AMP, calculation of FUL, and the definition of “multiple source drug” (18 HCPR 1837, 12/20/10).

“Due to the complexities outlined in our comments, we urge CMS to complete final rulemaking before implementing the pharmacy reimbursement provisions of the Affordable Care Act,” NACDS said. “We are committed to working with you to implement these provisions in a manner that complies with current law and maintains access to prescription drugs and pharmacy services for Medicaid beneficiaries.”

Inadequate Reimbursement.

In its comments, NCPA said some independent community pharmacies could be forced to leave the Medicaid program or close altogether unless changes are made to the proposed regulation.


Some independent community pharmacies could be forced to leave the Medicaid program or close altogether unless changes are made to the proposed regulation, the National Community Pharmacists Association said.




“Inadequate reimbursement could threaten patient access to prescription drugs by forcing community pharmacies out of the Medicaid program,” NCPA Chief Executive Officer B. Douglas Hoey said in a statement about NCPA's comments. “Ultimately, that would only raise health care costs as patients seek more expensive forms of medical care.”

NCPA made the following points in its comments:

  • Upon finalizing its AMP regulation, CMS should collect several months of AMP data and calculate draft FULs for review and comment before any new FULs are implemented.
  • State proposals to adjust Medicaid pharmacy dispensing fees should be based on an annual study of actual dispensing costs in that state.
  • To mitigate month-to-month price fluctuations that can leave pharmacies underpaid relative to their drug acquisition costs, CMS should require manufacturers to apply a 12-month smoothing process to the data they provide the agency.
  • CMS should codify in the final AMP regulation its policy that states adopting an actual acquisition cost (AAC) pharmacy reimbursement model must simultaneously adjust their dispensing fees to reflect a pharmacy's cost of dispensing, which typically far exceeds the dispensing fees paid by states.
  • To help preserve patient access in underserved rural and inner-city communities, CMS should exercise its authority to set FULs at a higher rate for independent community pharmacies to account for these pharmacies' higher drug acquisition costs.
Florida Pharmacy Association Weighs In.

The Florida Pharmacy Association said it is concerned that the move to require states to use AAC for brand-name drugs without a requirement that dispensing fees be increased will negatively affect patient access to community pharmacy services. The association is the professional society that represents Florida pharmacists.

Additionally, the Florida Pharmacy Association said it generally supports the definition of AMP as outlined in the proposed regulation. “However, we strongly object to CMS permitting manufacturers to include within the AMP determination, sales to entities other than retail community pharmacies,” the association said.

It also said “there is no statutory basis for CMS to permit the inclusion [in AMP] of manufacturer sales to specialty pharmacies, home infusion pharmacies and home health providers, or other entities that act or conduct business as wholesalers or community pharmacies. This is a back end way to allow potential mail order sales in the calculation of AMP which is prohibited by statute. This will lower AMPs and underpay pharmacies.”

Definition of Pediatric Indications.

Shire U.S. Inc., a global specialty biopharmaceutical company focused on the development of products used to treat attention deficit hyperactivity disorder (ADHD), said it is concerned about the definition of “pediatric indications” in the proposed rule.

Shire requested that CMS define the term “pediatric indication” for purposes of the Medicaid pediatric drug rebate to include indications for minors up to 18 years of age. In the proposed rule, “pediatric indication” is defined as birth through age 16.

“Adopting a more restrictive definition would not only be an arbitrary and capricious action that is inconsistent with the statute and violates the Administrative Procedure Act, but would also undermine the incentives that Congress has created to encourage the development of drugs for children and adolescents,” Shire said.

By Bronwyn Mixter  

The proposed rule is at

Comments, identified by docket number CMS-2345-P, are at

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