Lawmakers Introduce Bill to Change Medicaid Drug Reimbursement Rule

Reps. Nancy Boyda (D-Kan.) and Jo Ann Emerson (R-Mo.) have introduced legislation to change Medicaid’s drug reimbursement rates and increase the use of generic drugs, the lawmakers announced.

The bill is in reaction to a final rule issued by the Centers for Medicare & Medicaid Services (CMS) July 6 establishing a new method of setting limits on federal government reimbursement to state Medicaid agencies for prescription drug payments.

The rule stipulates that a federal upper limit (FUL) on what the government will reimburse state Medicaid agencies must be established for each multiple-source drug. The FUL will be based on average manufacturer price (AMP), which the rule defines.

The CMS issued the rule in response to a series of reports from the Government Accountability Office (GAO) and the HHS Office of Inspector General showing that Medicaid payments to pharmacies for generic drugs were higher than what pharmacies were actually paying for those drugs, the agency said.

However, critics say the rule contains an inaccurate AMP formula and will lead to lower reimbursement rates, harming pharmacies. In addition, the lower reimbursement rates could provide a disincentive to pharmacies to dispense some generic drugs. When compensating pharmacies for drugs under Medicaid, states will have to stay within the FUL or risk not receiving a full reimbursement from the CMS.

“The rule that CMS put out is an absolute disaster,” National Community Pharmacists Association (NCPA) Senior Vice President Charles Sewell said. The final rule will likely drive reimbursements lower than the CMS’ proposed rule, which a GAO report determined would compensate pharmacies an average of 36 percent below the cost to purchase medications, according to the NCPA.

Boyda and Emerson’s bill, H.R. 3140, the Saving Our Community Pharmacies Act of 2007, would replace AMP with retail acquisition cost, which would accurately reflect the money a pharmacy pays for generic medications, Sewell said. The bill also includes provisions to drive generic use, he added.

Under the CMS rule, “we’re actually encouraging the use of brand-name medicines over generics. We should be encouraging exactly the opposite,” Sewell said, adding that Medicaid has one of the lowest generic dispensing rates of insurers.

The bill would encourage the responsible use of generic drugs, saving taxpayers and the government money, according to Boyda.

The best opportunity to pass the bill would be to include it in legislation reauthorizing the State Children’s Health Insurance Program (S-CHIP), National Association of Chain Drug Stores Vice President of Government Affairs Paul Kelly said. The House and Senate are both debating that bill this week.

The lawmakers said the bill currently has 30 bipartisan cosponsors, adding that the House will see the bill as a better solution than the CMS’ rule. They agreed that adding the language to S-CHIP reauthorization would be a “good strategy.”

More information on H.R. 3140 can be seen at thomas.loc.gov/cgi-bin/bdquery/z?d110:h.r.03140:. — Emily Ethridge