Jul 18, 2007
Availability of Generic Medications to Medicaid Beneficiaries at Risk

ARLINGTON, VA — July 18, 2007 —Food Marketing Institute (FMI) member Ed Hagan, director of pharmacy for Associated Food Stores, testified today before the U.S. House of Representatives Small Business Committee about the devastating effect of a new generic prescription reimbursement rule from the Centers for Medicare and Medicaid Services (CMS).
     
"This new rule could result in the failure of some of our small business members," Hagan said. "Pharmacies will find it increasingly difficult to serve Medicaid patients."

The recently issued CMS rule bases reimbursement for generic prescriptions for Medicaid beneficiaries on its new "average manufacturer price" (AMP) construct.

"AMP is a flawed model because it calculates Medicaid generic drug reimbursements by including discounts that retailers don’t receive. By doing this, it ensures that retail pharmacies will be paid less than it costs them to purchase these medications," said John J. Motley III, senior vice president, government and public affairs, FMI.

Recent work by the Government Accountability Office (GAO) comparing AMP-based Federal Upper Limits (FULs) to pharmacy acquisition costs, and similar work by the Health and Human Services Office of the Inspector General, suggests that many pharmacies will lose money when AMP-based FULs are implemented. "Because overall pharmacy margins are so small, many pharmacies will not be able to sustain losses under Medicaid and will face the choice of leaving the program or going out of business," said Hagan.

Retailers support an amendment by Senator Blanche Lincoln (D-AR), Senator Pat Roberts (R-KS) and Senator Ken Salazar (D-CO) to ensure continued availability of generic medications to Medicaid beneficiaries. This amendment would halt scheduled Medicaid AMP payment reductions for generic drugs and provide a more rational approach to setting pharmacy reimbursement for generic drugs.

Associated Food Stores is a member-owned cooperative based in Salt Lake City, UT. Its numbers include 75 stores across eight states and Guam with pharmacy operations that fill as many as 500 prescriptions daily. The company co-owns the Western Family private label.

FMI members operate more than 19,000 pharmacies in their stores throughout the country. Many of these locations provide pharmacy services to significant numbers of Medicaid recipients.