JULY 01, 2006

Although Congress set the baseline for pharmacy reimbursement of generic drugs in the Medicaid program as the Average Manufacturer Price (AMP), top officials at the Centers for Medicare & Medicaid Services (CMS) told pharmacy leaders that they will not be encouraging states to use those figures to calculate payments. That news was good for independent pharmacists, who complained that the current AMP definition reflects only about 50% of the actual acquisition price of generic drugs.

"An AMP calculated too low, coupled with the relatively low average product cost of generics, would result in Medicaid reimbursements sharply below the pharmacy's costs," National Community Pharmacists Association (NCPA) officials said.

In agreeing with the independents'association officials, CMS Administrator Mark McClellan, MD, PhD, said that his agency would not comply with a provision in the newly enacted Deficit Reduction Act that instructed CMS to post AMPs on July 1, 2006. These "just aren't the right numbers to use," he said.

Dr. McClellan addressed NCPA's Annual Conference on National Legislation and Government Affairs in Washington, DC. "Pharmacists have made it clear to us that, unless AMPs are defined and calculated accurately and include only prices that are available to the ‘retail class of trade,'they will not accurately reflect prices available to retail pharmacies," he said. "We know that an imprecise definition of AMP, especially if publicly posted, will be misleading to state Medicaid directors and others who will use this as a reference point for setting pharmacy reimbursement," he told the meeting.

Dr. McClellan said that CMS is currently developing a revised definition of AMP that "will assure an accurate and effective AMP calculation." Additionally, he said that CMS would continue to encourage state Medicaid programs to create incentives for the use of generic drugs, including variable reimbursement systems that pay pharmacists higher dispensing fees for generics. According to Dr. McClellan, "if states do not maintain the right incentives for generic utilization, any savings will be lost to higher and more expensive brand-name utilization."


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