NCPA Urges Medicaid to Assure Fair Pharmacy Reimbursement in Finalizing AMP Rule

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Alexandria, Va. - April 4, 2012

Some independent community pharmacies could be forced to leave the Medicaid program or close altogether unless federal officials make changes to a proposed regulation relating to the calculation of Medicaid generic reimbursements using the average manufacturer price (AMP) of prescription drugs, the National Community Pharmacists Association (NCPA) said in comments recently submitted to the Centers for Medicare & Medicaid Services (CMS).

"Independent community pharmacies are the backbone of the Medicaid drug benefit. They provide cost-saving medication counseling, assist patients in underserved rural and inner-city areas, and rely on prescriptions for over 90 percent of their revenue," said NCPA CEO B. Douglas Hoey, RPh, MBA. "Inadequate reimbursement could threaten patient access to prescription drugs by forcing community pharmacies out of the Medicaid program. Ultimately, that would only raise health care costs as patients seek more expensive forms of medical care."

The AMP data covered in CMS' proposed regulation is used by the agency to set new federal upper limits (FULs) for common generic drugs in Medicaid. Based on flawed, previous AMP data collected from drug manufacturers, CMS has published seven proposed FULs lists, many of which would reimburse pharmacies below their drug acquisition costs.

In comments submitted to CMS, NCPA made the following points, among others:

  • Upon finalizing its AMP regulation, CMS should collect several months of AMP data and calculate draft FULs for review and comment before any new federal upper limits 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 average acquisition cost (AAC) pharmacy reimbursement model must simultaneously adjust their dispensing fees to reflect a pharmacy's cost of dispensing, which typically far exceed 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 the FULs at a higher rate for independent community pharmacies to account for these pharmacies' higher drug acquisition costs. Despite aggressive efforts to negotiate lower prices, community pharmacies' acquisition costs are often 25-50 percent higher than those of publicly held chain pharmacies—a fact borne out by a recent report by the Department of Health and Human Services Office of the Inspector General.

Earlier this year, 25 members of the Senate Finance and House Energy and Commerce committees wrote to CMS to highlight many of the concerns NCPA has expressed regarding insufficient, proposed FULs calculated from AMP data for Medicaid generic drug reimbursement.

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 23,000 independent community pharmacies. Together they represent a $93 billion health care marketplace, dispense nearly 40% of all retail prescriptions, and employ more than 315,000 people, including 62,400 pharmacists. Independent community pharmacists are readily accessible medication experts who can help lower health care spending. They are committed to maximizing the appropriate use of lower-cost generic drugs and reducing the estimated $290 billion that is wasted annually by improper medication use. To learn more go to or read NCPA's blog, The Dose, at

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