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Pallone Introduces Bill to Correct the New Medicaid Reimbursement Rule for Pharmacists

Press Release

Location: Washington, DC


U.S. Rep. Frank Pallone, Jr. (D-NJ), Chairman of the House Energy and Commerce Subcommittee on Health, introduced legislation yesterday that would correct a new Medicaid reimbursement rule set to take effect on October 1st in order to help ensure that Medicaid beneficiaries continue to have access to their prescription drugs.

Today, Medicaid beneficiaries rely on their local pharmacies for affordable and accessible medications to maintain their health. However, the new Medicaid generic drug reimbursement rule would raise the cost of drugs for this vulnerable population and may force pharmacists to turn away their Medicaid patients.

While the rule takes effect on October 1st, the full effect of the rule will likely not be felt until January of 2008. At that time, the Centers for Medicare and Medicaid Services (CMS) will begin reimbursing pharmacies for generic drugs for Medicaid beneficiaries based on the average manufacturer price (AMP) rather than the current average wholesale price.

A recent Government Accountability Office (GAO) report found that the shift to an average manufacturer price would result in Medicaid reimbursing pharmacies for generic drugs for Medicaid beneficiaries at 36 percent below the pharmacist's purchasing price.

"Medicaid patients are often our nation's most vulnerable health care consumers, and they rely on pharmacists to play an important role in the delivery of much-needed medications," Pallone said. "The Fair Medicaid Drug Payment Act of 2007 will help ensure that these patients are able to fill their prescriptions at the pharmacy they choose, and will prevent pharmacists who serve high Medicaid populations from closing their doors."

The Fair Medicaid Drug Payment Act of 2007 is the companion legislation to S. 1951 introduced by U.S. Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee, in the Senate earlier this year. The legislation corrects the new Medicaid reimbursement rule by:

* Removing discounted mail order and pharmacy benefit manager prices that are unavailable to community pharmacies and unfairly lower than the overall AMP formula.
* Requiring that Medicaid payment be calculated using the weighted average of the Medicaid generic drugs based on utilization.
* Restoring the previous practice of using three available generic products in calculating the Federal Upper Limits that are used for setting adequate pharmacy reimbursements.
* Increasing Medicaid reimbursement from 250 percent of the AMP to 300 percent in order to ensure pharmacies are not reimbursed below costs.
* Eliminating the requirement to publicly post the AMP on a CMS website.

The legislation also requires prior authorization for name-brand drugs if a less expensive generic exists.

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