Administration Proposes Medicaid Revision

One of the more interesting Medicaid news recently is the proposal to revise the Medicaid program’s by changing provisions defining average manufacturer’s prices and federal upper limits for drugs that qualify for the Medicaid rebate program.

The Centers for Medicare and Medicaid Services (CMS) came out with a proposal that had both the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) applauding as it minimized or prevented losses from selling generic drugs, without necessarily raising the prices too high. This, they said, would help to ensure the ability of their organizations to provide long-term patient care.

But what is it all about?

It all started with the 2005 Deficit Reduction Act (DRA), which required the CMS to set upper limits to Medicaid’s maximum amount for assisting in paying for drugs. At 250% of the average manufacturer’s price (AMP) of the lowest-cost version of any qualifying drug, the NACDS and the NCPA brought legal action to the situation, since the new formula would have forced them to either accept losses for selling generic drugs or not sell them at all.

It all came to a head in 2007, when a court injunction prevented the CMS from implementing many changes – and in the process, many people who did need assistance for their drug costs were left out in the cold. Drug stores, because they lost money on generic drugs, would stock up more on expensive brand-name equivalents.

The new proposal now aims to base generic drug costs on around 175% of the “weighted” AMP, which is based more on how much the drug is used, rather than on how much the cheapest version of the drug is. This is a more accurate way of assessing what the true cost of a generic drug is. While it may be more expensive than the prices before, it will make generic drugs available in more drug stores across the country.

Do take note, however, that these actions are not applicable to mail-order stores.

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