Published Online: Sunday, April 1, 2007

Controversial changes proposed by the Centers for Medicare & Medicaid Services (CMS) to alter the pharmacy reimbursement formula for generic medications are beginning to raise eyebrows—and hackles—on Capitol Hill. The changes are part of a CMS plan to cut $8.4 billion in Medicaid costs over the next 5 years. Significantly, however, pharmacy leaders note that more than 90% of those cuts are expected to come from slashing pharmacy reimbursement for lower-cost generic prescription medicines.

Officials at the National Community Pharmacists Association (NCPA) contend that such reimbursement cuts "would have a disproportionate impact on the nation's 24,000 independent community pharmacies, because 92% of their business comes from prescription drugs, and independents serve large populations of Medicaid recipients in urban and rural areas."

NCPA is not alone in its criticism of the plan. A recent Government Accountability Office (GAO) study found that the proposed regulations would force pharmacists to accept Medicaid reimbursement for generic drugs that is, on average, 36% below their acquisition cost. In response to that study, a bipartisan group of 74 members of Congress fired off a letter to CMS, warning that the "proposed payment formula will be devastating to many community retail pharmacies, Medicaid beneficiaries, and the financing of the Medicaid program itself."

Citing the GAO findings, the congressional leaders told CMS that the proposed anti-generic reimbursement change "would clearly fail to cover the pharmacy's costs of purchasing generic medications. In fact, the formula would create a disincentive to dispense generic drugs and would deny the Medicaid program and beneficiaries the savings gained from generic medications."

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