The Deficit Reduction Act of 2005 created a new Federal Upper Limit (FUL) based on Average Manufacturers Price (AMP) for multiple-source generic medications. This deleterious shift will take a staggering $8 billion from community pharmacy's generic-drug payments over the next 5 years - an overall reduction of 30% of pharmacy's current Medicaid generic-drug reimbursement. Brand drug reimbursement is unaffected.
AMP is flawed and inappropriate as a measure of pharmacy reimbursement. The definition of AMP issued by CMS on July 6, 2007, includes many prices and discounts that are not attainable by retail pharmacies. Making matters worse, payments to retail pharmacies will be based on the lowest AMP for each particular drug and on more drugs than under current law.
A June 2007 Department of Health and Human Services (HHS) Office of Inspector General (OIG) report concludes that the new AMP-based FULs fall below pharmacy acquisition cost for 19 of the 25 high-expenditure Medicaid drugs studied. The findings are consistent with a December 2006 Government Accountability Office report that found AMP will fall 36% below pharmacy acquisition cost, on average. When you factor in the costs necessary to operate a pharmacy and dispense prescriptions, costs that are not adequately covered by dispensing fees in state Medicaid programs, the loss is even greater.
Patients - especially those in rural areas - would lose access to needed cost-saving medications if pharmacies are forced to leave the Medicaid program by financial pressure. Thousands of community pharmacies that serve large Medicaid populations could be forced to close their doors entirely, resulting in lost jobs, lost tax revenues, and a loss of prescription drug access for their communities.
Today's broad access to prescription medicines cannot be maintained under the proposed system. A loss of access to cost-saving medicines will result in increased Medicaid costs for physician visits, emergency room treatment, and long-term care costs - increased costs all to be born by the taxpayer.
A legislative fix is necessary to preserve access and achieve savings. The AMP-based system is erroneous - pharmacy reimbursement should reflect actual costs paid by pharmacies, not ill-defined sales prices reported by drug manufacturers. Real savings in Medicaid can be achieved through policies that encourage generic use, rather than by restricting patient access by slashing reimbursement.
Community pharmacy has been united and resolute in its response. The Coalition for Community Pharmacy Action (CCPA) believes that CMS demonstrated total disregard for our nation's most vulnerable patients, especially those in lowincome areas. This ruling restricts patient access to prescription medicines if pharmacies are forced from the Medicaid program. Patients in rural areas will be particularly disadvantaged when the pharmacy serving their community is driven out of business entirely. The CCPA will continue to engage legislators at the federal and state levels, explore legal options, and communicate aggressively on the need for changes to the proposed system before our prescription care providers are driven from Medicaid.
Our industry has been engaged from the beginning in fighting these drastic Medicaid cuts. More than 250 members of Congress have written to CMS and HHS to express their concern about the AMP rule. Congress has heard our message, but we must keep attention focused on this urgent issue. Pharmacists, pharmacy employees, patients, and friends can all help by contacting their state senators and representatives. We will continue pursuing every avenue to preserve patient access to community pharmacy.