Assuring Medicaid Patients Access to Pharmacy Services Through Adequate Dispensing Fees
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1 January 25, 2012 Ms. Cindy Mann, Deputy Administrator and Director Center for Medicaid, CHIP and Survey & Certification Centers for Medicare & Medicaid Services Department of Health and Human Services 200 Independence Avenue, SW Washington, DC Subject: Assuring Medicaid Patients Access to Pharmacy Services Through Adequate Dispensing Fees Dear Ms. Mann: Thank you again for the opportunity to meet with you and your team about Medicaid pharmacy reimbursement issues. We appreciated your willingness to discuss the importance of fair and accurate reimbursement for community pharmacies that provide services to Medicaid patients. As we discussed, addressing pharmacy reimbursement comprehensively, both the cost of the drug product and the cost of dispensing, is critical to maintaining access to pharmacy services for our Medicaid patients. NACDS and NCPA, who represent the totality of community pharmacy, including independent pharmacies, traditional chain pharmacies, supermarket and mass merchant pharmacies of all sizes, are committed to working with you on the draft Federal Upper Limit (FUL) lists for multiple source drugs, and implementation of the pharmacy reimbursement provisions of the Affordable Care Act (ACA). We appreciate the thoughtful, stepwise approach you have taken to implement these provisions thus far. Furthermore, we are grateful for the proactive stance the agency has taken in regard to requiring accurate dispensing fees in cases where states have adopted Average Acquisition Cost (AAC) as their Medicaid reimbursement benchmark. CMS has also said that it would require the same accurate dispensing fee in cases where states use the National Average Drug Acquisition Cost (NADAC) survey. We believe the same direction to states is needed again, and urge CMS to provide guidance to the states on the need to adjust Medicaid dispensing fees before FULs based on Average Manufacturer Price (AMP) are used for pharmacy reimbursement. The importance of increasing dispensing fees has been regularly discussed by policymakers as CMS and states move toward more acquisition cost-based reimbursement. For example:
2 During Senate debate regarding changing pharmacy reimbursement, then Senate Finance Committee Chairman Charles Grassley indicated states would need to increase Medicaid dispensing fees 1 In its estimate the Congressional Budget Office assumed states would increase dispensing fees 2 CMS Administrator Mark McClellan stated CMS guidance encouraged states to consider paying pharmacies more in dispensing fees 3 These statements reflect broad consensus by federal policymakers that pharmacies should be reimbursed accurately for both the cost to acquire and dispense prescription medications to Medicaid patients. While the Affordable Care Act made revisions to the way in which AMP should be defined, how AMP-based FULs should be calculated, and other matters, Congress has made clear that its position on accurate dispensing fees remains unchanged. In a letter to CMS on December 14, 2011, a bipartisan group of 40 members of the House of Representatives stated, When setting pharmacy reimbursement rates both components of reimbursement product cost and cost to dispense must be taken into consideration when determining whether pharmacies are paid accurately. Similarly, in a letter to CMS on January 12, 2012, a bipartisan group of 14 Senators also expressed concern with dispensing fees in the context of AMP-based FULs, writing both components of reimbursement product cost and cost to dispense be taken into consideration to ensure pharmacies are adequately paid. We are pleased that the importance of comprehensive reimbursement has been recognized in the context of AAC/NADAC. Since analysis of the four draft FUL lists released by CMS indicates that AMP-based FULs are in many cases below AAC, strong leadership is needed from CMS to help states understand the importance of setting accurate dispensing fees to maintain beneficiary access. In our minds, there should be no distinction between requiring states to adjust fees to use AAC/NADAC compared to requiring states to adjust fees to use FULs based on weighted AMPs. In fact, a comparison of recent draft FUL lists to the Alabama AAC list shows that AAC is above FULs in many cases. This concerns us greatly, as no FUL should be published unless it is set at least at the NADAC. CMS has such authority to set FULs at greater than 175% of the weighted AMP. Moreover, why would states use NADAC or AAC if they have to adjust fees to use these benchmarks, but not have to adjust fees to use FULs? Since states will need to make adjustments to dispensing fees either through legislation or regulation, and additional time will be needed to complete the State Plan Amendment (SPA) process, we urge CMS to issue a letter to state Medicaid directors or other policy guidance to states quickly. Sufficient time for state action should be provided before finalizing draft FULs and using them for pharmacy reimbursement. For your information, we have also attached a list of the components that make up the cost of 1 Congressional Record, Senate, November 3, 2005, p. S CBO, Cost Estimate: S Deficit Reduction Act of 2005, P McClellan remarks, NCPA meeting, May 22, 2006.
3 dispensing. We appreciate your ongoing willingness to discuss fair and accurate reimbursement for pharmacies, and would welcome the opportunity to meet with you and members of the Medicaid pharmacy team to share additional information. Thank you for considering our views. Sincerely, Carol A. Kelly Senior Vice President Government Affairs and Public Policy John Coster Senior Vice President, Government Affairs
4 Variables Included in Setting Dispensing Fees As states conduct annual comprehensive cost of dispensing surveys, these studies should take into account a wide variety of factors that should be included in setting dispensing fees. These factors should include: Prescription Department Payroll /Personnel Expenses Prescription Department (Direct Costs): o Prescription supplies o Professional liability insurance for pharmacists o Prescription department licenses, permits and fees o Dues, subscriptions and continuing education for the prescription department o Delivery expenses (only prescription-related) o Postage and mailing o Inventory services o Lost inventory o Warehouse expense o Bad debts for prescriptions (including uncollected co-pays) o Computer systems (related only to the prescription department) including software and maintenance o Prescription claim transmission expenses, Switching Fees, FSA Tracking, E- prescribing charges (transaction fees, enrollment, etc) o Compounding equipment expenses o Third party-prescription audit adjustments (write-offs) o Other prescription-department-specific costs Pharmacy-Wide Expense Items (indirect cost shared with other departments): o Building depreciation o Taxes (personal property, real estate, payroll, sales etc.) o Rent (building, computer equipment and other equipment rent o Building and equipment maintenance and repairs o Custodial services o Insurance (general liability not including professional liability, property/casualty, workers compensation and employee medical insurance, life insurance o Other employee benefits (pension fund, profit sharing and similar benefits paid by the pharmacy o Legal and professional service fees (attorneys, accountants, etc.) o Bad Debts other than third-party prescription audit expenses o Security services o Charitable contributions o Telephone/internet o Utilities o Other operating and office supplies
5 o Advertising (promotional and non-promotional) o Credit card transaction fees o Central administration expenses
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