Pharmacy Industry Groups Sue To Block Medicaid Rule That Would Reduce Payments For Generic Medicines

Main Category: Pharma Industry / Biotech Industry
Also Included In: Litigation / Medical Malpractice;  Medicare / Medicaid / SCHIP
Article Date: 09 Nov 2007 - 11:00 PDT

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The National Association of Chain Drug Stores and the National Community Pharmacists Association on Wednesday filed a joint lawsuit against HHS and CMS, also naming HHS Secretary Mike Leavitt and acting CMS Administrator Kerry Weems, over a new rule that cuts the reimbursement rate of prescription drugs for Medicaid, The Hill reports. The lawsuit was filed in a federal court in Washington, D.C. (Young, The Hill, 11/8).

The rule, mandated by the Deficit Reduction Act of 2005 and scheduled to take effect in January 2008, seeks to ensure that Medicaid can obtain prescription drug discounts similar to those obtained by private entities. The rule will redefine the average manufacturer price for brand-name and generic medications. States use AMPs to calculate Medicaid reimbursement rates for medications. Under the rule, the federal government will post AMPs on a Web site that consumers could access. In addition, the rule will limit the federal share of the cost of brand-name medications when a generic version is available. The rule will exclude pharmacy benefit managers and pharmacies in nursing homes and assisted living facilities. According to CMS, the rule will save the federal government and states $8.4 billion over the next five years (Kaiser Daily Health Policy Report, 10/16).

NACDS and NCPA say the change might force some independent pharmacies to close because it will reduce reimbursements to 36% less than the amount that pharmacies pay for the medications (Bloomberg/Boston Globe, 11/8). The groups in a statement said that their members cannot sell prescription drugs at 36% less than cost "and be able to purchase, stock and dispense drugs in the low-income communities where Medicaid sales are a large percentage of the business" (CQ HealthBeat, 11/7).

Lawsuit Details, Legislation
The lawsuit claims that the reimbursement rule goes beyond the congressional intent of the Deficit Reduction Act. As a first step, the groups will request a preliminary injunction to prevent the rule from being implemented in January 2008. NCPA General Counsel John Rector said that step is necessary to prevent HHS from waiting until the rule takes effect before responding to the lawsuit.

CMS spokesperson Jeff Nelligan in an e-mail said that the agency "believes that the new (payment) regulation is fully consistent with the (Deficit Reduction Act) and other relevant provisions of the Social Security Act and thereby implements Congress' desire to make Medicaid prescription drug payments more efficient and economical" (The Hill, 11/8).

Several lawmakers have introduced legislation that would reverse the scheduled cut in payments, although none of those bills has "received much attention," according to CongressDaily. Senate Finance Committee Chair Max Baucus (D-Mont.) might attach a provision reversing the cut to a bill that his committee is scheduled to consider that would delay a scheduled Medicare cut to physician payments (CongressDaily, 11/7).

The two pharmacy groups on Wednesday sent a letter to Senate Finance Committee and House Energy and Commerce Committee members, as well as co-sponsors of bills addressing the issue. "We wanted to be in touch with you immediately to emphasize an important point: this lawsuit was necessary at this time given the impending crisis on January 2008 (sic), but legislative action this year remains necessary to sufficiently remedy this problem," according to the letter (The Hill, 11/8).

Related Bill
In other pharmacy news, the House Judiciary Committee on Wednesday approved a bill (HR 971) that would exempt independent pharmacists from antitrust laws so they can collaborate in contract negotiations with health insurers and pharmacy benefit managers, CQ Today reports. The bill, sponsored by Rep. Anthony Weiner (D-N.Y.), is a response to complaints from independent pharmacists about low reimbursements and payment delays resulting from the Medicare prescription drug benefit.

Committee members by voice vote adopted two amendments from Rep. Darrell Issa (R-Calif.) and one from Weiner. Issa's first amendment would define an independent pharmacy as one with less than 10% of the market share of a Medicare Part D prescription drug region. The second amendment would affirm the Federal Trade Commission's oversight authority of independent pharmacies. Weiner's amendment would require that Congress vote to reauthorize the bill after five years and that the Government Accountability Office study the effects of the bill and issue recommendations for its extension after that time.

PBMs and other bill opponents, including FTC, say the bill is unnecessary because pharmacists can reject the terms of a contract, adding that the bill will increase costs to consumers. The Association of Community Pharmacists on its Web site said that the legislation would "establish a balanced playing field between pharmacies and PBMs, would reduce the pressure on the government to regulate reimbursement rates and reduce prices for consumers" (Webber, CQ Today, 11/7).

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