NCPA Executive Update

NCPA Executive Update delivers insights on legislative, regulatory, policy, and industry developments from NCPA CEO B. Douglas Hoey, Pharmacist, MBA, to NCPA members and pharmacy leaders every other Friday.

Are higher Medicaid dispensing fees coming? | NCPA Executive Update | February 26, 2016

by NCPA | Feb 26, 2016

Dear Colleague,

Doug Hoey

This week more than 200 pharmacy owners and industry leaders dialed in to the NCPA Member Forum, "Changes Coming to Medicaid Pharmacy Reimbursement—What You Need to Know." We hosted the forum because of the impact on prescription reimbursement that will result from the Centers for Medicare and Medicaid Services' (CMS) recent release of the final rule on Average Manufacturer Price (AMP)-based FULs, or federal upper limits. Not only will it have an impact on fee-for-service Medicaid prescriptions (17% of the average community pharmacy's prescriptions according to the 2015 NCPA Digest, sponsored by Cardinal Health), but there is a decent chance that other payers will use this model as a point of reference for their payments.

You are likely already aware of the checkered history of the AMP-based FULs. As originally released by CMS in 2007, the list of drug prices was fatally flawed. Pharmacy payments would have been slashed and patients would likely have lost access to thousands of pharmacies.

NCPA and the National Association of Chain Drug Stores (NACDS) filed a federal lawsuit seeking a temporary restraining order. We were granted that request and were able to halt implementation. That legal win avoided cuts of more than $5 billion to community and chain pharmacies and maintained patient access to thousands of pharmacies that would have been in jeopardy of closing their doors.

The Director of CMS' Medicaid Pharmacy Division, John Coster, PhD, RPh, was the special guest this week at the Member Forum. Coster knows this issue well having worked in the early '90s on the staff of Sen. David Pryor (D-Ark.), who led changes to prescription drug pricing, and then for NCPA years later. John gave an overview of the final rule and then answered dozens of questions submitted from NCPA members. If you missed the call, you can listen to the audio file.

It's heady stuff and there are enough acronyms to fill a barrel of alphabet soup. One of the key acronyms is NADAC, National Average Drug Acquisition Cost, which has a function that is self-explanatory. NADAC is calculated by averaging prescription drug invoices from community and chain pharmacies. If you live in one of the 13 states that currently or will soon use either a state Actual Acquisition Cost (AAC) or NADAC as the basis for paying for Medicaid prescriptions, then you're already familiar with it.

Thirteen states have turned their Medicaid program over to Managed Care Organizations (MCOs). Their pricing is not directly affected by the new final rule, but approximately two dozen states are trying to decide whether to go with an MCO or use NADAC as the basis for Medicaid prescription reimbursement.

One of the questions that John responded to that I thought was particularly important to prescription pharmacy payments was about the dispensing fee: "Has there been a range for the professional service fee?"

"For the states that have gone to a NADAC or AAC (payment model), their dispensing fees have generally been in the $10-$11 area. What I will say is that states have flexibility to set pharmacy reimbursement within reason," Coster said. "So, some states may want to pay independents more than chains; they may want to pay more for generics than brands. We're open to different methodologies that states might want to use. At the end of the day, we (CMS) kind of know where we want to land. If a state comes in with a fee of $8 for all pharmacies we would probably say that was too low. If they came in at $14 we'd probably say that was too high. We kind of know the range we're looking for but if a state wanted to, for example, pay pharmacies more for dispensing generics or preferred brands and less for non-preferred brands, that's something that we would look at and entertain."

The changes to Medicaid pharmacy payments are one more example of pharmacy payment reform that is moving pharmacy toward a value-based payment system. Individual state advocacy efforts regarding Medicaid reimbursement will be more important than ever. Understanding pharmacy payment changes, starting with Medicaid, will keep your business FULproof.


Doug Hoey