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Community Pharmacy Continues to Fight AMP

Julie Khani and Charles Sewell
Published Online: Friday, June 1, 2007   [ Request Print ]

The Centers for Medicare & Medicaid Services (CMS) is set to release a rule that will deal a crippling blow to community pharmacy. The proposed rule will take a staggering $8.4 billion from community pharmacy?s generic drug payments over the next 5 years?an overall reduction of 30% of pharmacy?s Medicaid current generic drug reimbursement.

The proposed rule implements several sections of the Deficit Reduction Act of 2005 (DRA), which require that CMS change the method for setting the Medicaid Federal Upper Limit (FUL) on generic drug pharmacy reimbursement. The proposed formula would calculate the FUL based on Average Manufacturers Price (AMP). AMP was never intended to be used as a reimbursement benchmark and, because of the way it is calculated by manufacturers, its use to set payment limits for generics could significantly underpay pharmacies.

The possible consequences of this decrease in reimbursement are alarming. Pharmacies that fill a large number of Medicaid prescriptions could be forced to shorten hours, lay off workers, and even close down completely?all of which threaten patient access to prescription drug care.

A recent Government Accountability Office report shows that pharmacies will be reimbursed at 36% below their cost to purchase generic medicines, on average. The study even questions the use of AMP as a benchmark at all. Nearly 85% of the generic drugs studied showed a significant fluctuation in their AMP between the first and second quarters of 2006, but, because AMP is reported in one quarter but implemented in another, it does not reflect the current cost to pharmacies.

Inadequate reimbursement rates reduce incentives for pharmacies to dispense lower-cost generic medicines, directly contradicting present efforts to implement cost-saving measures in the Medicaid program. For every 1% decrease in generic dispensing, Medicaid loses hundreds of millions of dollars. In other words, CMS?s proposed definition for AMP will simply hurt pharmacies and the Medicaid patients that rely on them; it could cost taxpayers billions of dollars a year.

Community pharmacy has been united and resolute in its response. Both the National Community Pharmacists Association and the National Association of Chain Drug Stores?along with numerous other pharmacy groups?have submitted comments on the CMS rule and enlisted support from key lawmakers.

House Energy & Commerce Committee Chairman John Dingell (D, Mich) and Sen Max Baucus (D, Mont), chairman of the Senate Finance Committee, have communicated their concerns to CMS. Baucus wrote: ?Given how much community retail pharmacies have done to help Medicaid programs to control their drug costs and to encourage use of generic drugs, it makes little sense to take billions of dollars out of this infrastructure.?

We need both Congress and CMS to intervene now to prevent these devastating generic drug cuts from going into effect. The fight is not over, but, more than ever, it is essential for community pharmacy to get engaged. Pharmacists should contact their elected officials in Washington and request that they share their concerns with CMS, and encourage patients to do the same. Pharmacists can personally invite members of Congress to visit their pharmacy, and they can submit opinion pieces to their local newspaper?anything to promote the message of increasing generic use and adequate reimbursement.

The time to act is now. The future of community pharmacy depends on your support.

The Coalition for Community Pharmacy Action (CCPA) is an alliance between the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA), which together represents more than 55,000 community pharmacies. CCPA leverages the support, effort, and infrastructure of NACDS and NCPA while engaging community pharmacy to participate and advocate on issues affecting the industry.

Ms. Khani and Mr. Sewell are co-presidents of the Coalition for Community Pharmacy Action.

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