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Medicaid Outpatient Prescription Drugs: Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisiton Costs
John E. Dicken (au)
Medicaid -- the joint federal-state program that finances medical services for certain low-income adults and children -- spent $15.0 billion on outpatient prescription drugs in FY 2007. Instead of directly purchasing drugs, state Medicaid programs reimburse retail pharmacies for dispensing them to Medicaid beneficiaries. The federal government provides matching funds to states to help cover the costs of their Medicaid programs, and states must pay the remaining costs to qualify for these federal funds. For certain outpatient prescription drugs, state Medicaid programs may only receive federal matching funds for reimbursements up to a maximum amount known as a federal upper limit (FUL). Designed to control drug spending, FULs are currently calculated as 150% of a drug's lowest published price in three national drug pricing compendia. State Medicaid programs can determine reimbursements to retail pharmacies for each drug, but the federal government will only provide matching funds to the extent that reimbursements for all drugs subject to FULs do not exceed established FULs in the aggregate. The Deficit Reduction Act of 2005 (DRA) included provisions -- the implementation of which has been delayed by judicial and legislative action -- that would change the methodology for calculating FULs. The Nat. Assoc. of Chain Drug Stores (NACDS) and the Nat. Community Pharmacists Assoc. (NCPA), have claimed that AMP-based FULs would make some retail pharmacies unprofitable and thus limit certain Medicaid beneficiaries' access to retail pharmacies. This report found that if AMP-based FULs had been in place in the second quarter of 2008, they would have been lower than average retail pharmacy acquisition costs, in general, for most of the drugs in the reportís sample and in the national aggregate. The median AMP-based FULs for the second quarter of 2008 would have been lower than average retail pharmacy acquisition costs for 54 of the 83 drugs in our sample; 44 drugs had FULs that would have been at least 25% below acquisition costs. In the aggregate, the FULs would have been 17% lower than acquisition costs, though the difference varied significantly by state, from 57% lower to 49% higher. However, 64 drugs had at least one therapeutically equivalent version with acquisition costs below the FUL, indicating that pharmacies may be able to substitute lower-priced therapeutic equivalents to bring their costs below the FUL. AMP-based FULs also varied significantly throughout 2008 for 38 drugs, in some cases exceeding the average retail pharmacy acquisition cost one month and falling below it in another month. Figures.
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