NCPA addresses CMS around AMP impact on community pharmacy

ALEXANDRIA, Va. — The National Community Pharmacists Association on Wednesday offered federal Medicaid officials a number of suggestions to address methodology that, if left in place, would result in what the NCPA couched as "potentially devastating cuts" in Medicaid pharmacy reimbursement for a wide range of common, generic prescription drugs.

In a letter to the Centers for Medicare and Medicaid Services, NCPA detailed a number of issues with the average manufacturer price data on which CMS is relying to calculate new caps on Medicaid pharmacy reimbursement, known as federal upper limits, for multiple source, generic prescription drugs.

“Independent community pharmacies are the backbone of the Medicaid drug benefit,” stated NCPA CEO Douglas Hoey. “These small-business pharmacists are often located in underserved rural and inner-city locations and care for twice as many Medicaid patients compared to national chain pharmacies," he said. “However, the newly proposed limits published by federal Medicaid officials would reimburse independent community pharmacies at rates that are below even the pharmacy’s acquisition costs for hundreds of products.”

In the letter, NCPA explains the following concerns and recommendations:

  • The AMP data on which CMS is relying does not accurately reflect acquisition costs for community pharmacies. Even at the reimbursement baseline established in the ACA, or Affordable Care Act (175% of the weighted average AMP), there are hundreds of products on CMS’ proposed list with FULs that are below an independent community pharmacy’s acquisition costs;

  • Inconsistency among drug manufacturer practices may contribute to the below-market FULs. The lack of guidance from CMS to manufacturers in terms of fully defining AMP has resulted in widely varying manufacturer practices in calculating AMP values. This, in turn, may contribute to the inadequate FULs proposed by CMS. Consequently, the new AMP regulation should be finalized before any AMP values are used to set FULs;

  • Insufficient manufacturer data. The FULs are based on one month’s AMP data, without regard to the statutorily required “smoothing process” to help avoid wild fluctuations that could occur from month to month;

  • CMS should recognize independent community pharmacies’ higher drug acquisition costs. Despite aggressive efforts to negotiate lower prices, community pharmacies' acquisition costs are often 25% to 50% percent higher than those of publicly held chain pharmacies. The ACA granted CMS the flexibility and authority to set the FULs at a higher rate to account for that difference and to help preserve patient access in underserved rural and inner-city communities; and

  • CMS should fully resolve these and other issues before publishing its final, revised FULs. The publication by CMS of below-market reimbursement caps, such as those initially proposed, could result in additional health plans adopting a flawed reimbursement standard and further reducing the ability of independent community pharmacies to continue serving patients.

“The best way to lower health costs associated with prescription drugs is through the appropriate use of generic drugs and greater adherence, which helps prevent complications," Hoey added. “Medicaid patients rely on clinically trained pharmacists for counseling, which could be jeopardized if CMS doesn’t ultimately arrive at a more practical approach.”


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