Report: Medicaid pricing plan would have devastating effects

ALEXANDRIA, VA. —A new report from one of the pharmacy experts who has advised the Centers for Medicare and Medicaid Services lends credence to claims by community pharmacy leaders that the government’s new Medicaid reimbursement formula could seriously erode pharmacy profit margins and damage the industry.

Leaders of the National Association of Chain Drug Stores and the National Community Pharmacists Association are using the new study to bolster their claim that the new generic drug reimbursement formula could irreparably harm many pharmacies.

The author of the report, pharmacy educator Stephen Schondelmeyer, PhD, contends that the Medicaid reimbursement cuts, set to take effect Jan. 30, 2008, could devastate pharmacies that serve large populations of Medicaid patients in rural or inner-city urban areas. Those cuts could lead to the loss of as many as 10,000 to 12,000 pharmacies nationwide, he said.

In his report, Schondelmeyer condemns the government plan to shift Medicaid prescription payments for generic drugs to a new formula, based on the “average manufacturer price,”or AMP, of the drug. That market-based pricing formula, he contends, is seriously flawed because it takes into account the prices paid by mail-order pharmacies, institutional pharmacies and other pharmaceutical suppliers that don’t fall within the retail pharmacy class of trade, thus skewing the formula and leading to a false picture of what retail pharmacies actually pay for generic drugs.

NACDS and NCPA made extensive use of the Schondelmeyer study in court filings last month seeking an injunction against CMS’ new Medicaid payment plan. “The economic report by Dr. Schondelmeyer…is further evidence of both the illegality and anticipated harm of the final CMS rule,”asserted NACDS president and chief executive officer Steven Anderson and Bruce Roberts, NCPA executive vice president and chief executive officer. “It is worth noting that CMS has relied on [his] expertise and analysis previously, having hired him to prepare six reports for the agency.”

Schondelmeyer, who heads the Department of Pharmaceutical Care & Health Systems at the College of Pharmacy at the University of Minnesota, also warned that “flawed data related to this rule might be published online as early as December 2007,”they noted.

“In general, transparency of price information is usually a good thing for consumers and for the market,”Schondelmeyer reported. “However, when disclosed information is complex, confusing or even inaccurate, the transparency loses its value or even becomes counterproductive.”