Pallone joins congressional chorus to change Medicaid pay model

WASHINGTON —Joining a growing congressional chorus calling for change in the way federal and state governments will pay pharmacies for generic drugs dispensed under the Medicaid program, a powerful member of the U.S. House of Representatives is pushing new legislation to change the Medicaid payment model set to go into effect early next year.

Rep. Frank Pallone, the New Jersey Democrat who chairs the House Energy and Commerce Subcommittee on Health, is winning high praise from pharmacy advocates for his introduction late last month of H.R. 3700. The bill serves as the House companion bill to The Fair Medicaid Drug Payment Act of 2007, or S. 1951, introduced earlier by Senate Finance Committee chairman Max Baucus, D-Mont.

If the House and Senate versions are reconciled, as expected, and signed into law by the President, they could allay the worst fears pharmacy leaders have about the looming changes to the Medicaid reimbursement formula for generic drugs dispensed in U.S. pharmacies. That new payment formula, based on the average manufacturer’s price of a multi-source drug plus a 250 percent dispensing fee, would impose “deep payment cuts on pharmacists for generic drugs dispensed to Medicaid beneficiaries,” the National Association of Chain Drug Stores asserted last month.

In line with the Deficit Reduction Act of 2005, the Centers for Medicare and Medicaid Services has set a January 2008 deadline for the new AMP generic payment policy to take effect. Under its provisions, chain and independent pharmacies will stagger under a total of $8 billion in cuts from Medicaid pharmacy reimbursement for generic drugs, according to the government’s own estimates.

In response, NACDS and other pharmacy groups have often cited a report by the Government Accountability Office, which predicts that the new formula will reimburse pharmacies, on average, 36 percent below the average costs of acquiring the generic. They also predict the new payment model would deter the use of lower-priced generics, costing taxpayers more to run the Medicaid program.

In promoting the House version of the Fair Payment bill, Pallone echoed the growing skepticism on Capitol Hill about the new AMP policy. “Medicaid patients are often our nation’s most vulnerable healthcare consumers, and they rely on pharmacists to play an important role in the delivery of much-needed medications,” he 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.”

NACDS president and chief executive officer Steven Anderson praised Pallone “for his leadership and initiative to develop a legislative solution that will help maintain the current level of vital pharmacy services available in low-income communities.

“With prior bold moves by friends of pharmacy, and now the support of committee and subcommittee chairmen in both chambers of Congress, we continue to make progress on our…campaign to mitigate these cuts and their effects on pharmacy and patients,” Anderson said. “NACDS greatly appreciates the commitment of Chairman Baucus, Chairman Pallone, Rep. Nancy Boyda, D-Kan., and the co-sponsors of their respective legislation, to addressing this problem.”