Medicaid Outpatient Prescription Drugs: Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisition Costs

PDF Version Also Available for Download.

Description

Correspondence issued by the Government Accountability Office with an abstract that begins "Medicaid--the joint federal-state program that finances medical services for certain low-income adults and children--spent $15.0 billion on outpatient prescription drugs in fiscal year 2007. Instead of directly purchasing drugs, state Medicaid programs reimburse retail pharmacies for dispensing them to Medicaid beneficiaries. The federal government provides matching funds to states to help cover the costs of their Medicaid programs, and states must pay the remaining costs to qualify for these federal funds. For certain outpatient prescription drugs, state Medicaid programs may only receive federal matching funds for reimbursements up ... continued below

Creation Information

United States. Government Accountability Office. November 30, 2009.

Context

This text is part of the collection entitled: Government Accountability Office Reports and was provided by UNT Libraries Government Documents Department to Digital Library, a digital repository hosted by the UNT Libraries. More information about this text can be viewed below.

Who

People and organizations associated with either the creation of this text or its content.

Provided By

UNT Libraries Government Documents Department

Serving as both a federal and a state depository library, the UNT Libraries Government Documents Department maintains millions of items in a variety of formats. The department is a member of the FDLP Content Partnerships Program and an Affiliated Archive of the National Archives.

Contact Us

What

Descriptive information to help identify this text. Follow the links below to find similar items on the Digital Library.

Description

Correspondence issued by the Government Accountability Office with an abstract that begins "Medicaid--the joint federal-state program that finances medical services for certain low-income adults and children--spent $15.0 billion on outpatient prescription drugs in fiscal year 2007. Instead of directly purchasing drugs, state Medicaid programs reimburse retail pharmacies for dispensing them to Medicaid beneficiaries. The federal government provides matching funds to states to help cover the costs of their Medicaid programs, and states must pay the remaining costs to qualify for these federal funds. For certain outpatient prescription drugs, state Medicaid programs may only receive federal matching funds for reimbursements up to a maximum amount known as a federal upper limit (FUL). Designed to control drug spending, FULs are currently calculated as 150 percent of a drug's lowest published price in three national drug pricing compendia. State Medicaid programs can determine reimbursements to retail pharmacies for each drug, but the federal government will only provide matching funds to the extent that reimbursements for all drugs subject to FULs do not exceed established FULs in the aggregate. A 2005 report by the Department of Health and Human Services' (HHS) Office of Inspector General (OIG) found that FULs were ineffective at controlling outpatient Medicaid prescription drug spending. The Deficit Reduction Act of 2005 (DRA) included provisions--the implementation of which has been delayed by judicial and legislative action--that would change the methodology for calculating FULs. Under the DRA, FULs would be calculated as 250 percent of the average manufacturer price (AMP) for a drug's least costly therapeutically equivalent version. In 2006, the Congressional Budget Office estimated that the implementation of AMP-based FULs would reduce total Medicaid spending for prescription drugs by $11.8 billion from 2007 through 2015. However, retail pharmacies have raised concerns that AMP-based FULs would not be sufficient to cover their costs of acquiring drugs dispensed to Medicaid beneficiaries. Two retail pharmacy industry groups, the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA), have claimed that AMP-based FULs would make some retail pharmacies unprofitable and thus limit certain Medicaid beneficiaries' access to retail pharmacies. A 2006 GAO report and a 2007 report by the HHS OIG both found that AMP-based FULs would have been lower than average pharmacy acquisition costs, on a drug-by-drug basis, for most drugs included in the respective samples. To implement the DRA provisions pertaining to prescription drugs in Medicaid, CMS published a final rule in July 2007. This rule includes provisions regarding the calculation of AMP-based FULs that might also affect how they compare to pharmacy acquisition costs. For example, FULs apply only to certain outpatient prescription drugs--known as multiple-source drugs--and the rule changed the definition of multiple-source drugs. Additionally, to minimize the effect of outliers, the final rule included a provision which would use the second-lowest AMP for a multiple-source drug to set the FUL if the lowest AMP is less than 40 percent of the second-lowest AMP. The final rule requires drug manufacturers to report AMP data on a monthly basis, and drug manufacturers and state Medicaid programs were expected to begin complying with the provisions of the final rule by October 1, 2007."

Language

Item Type

Identifier

Unique identifying numbers for this text in the Digital Library or other systems.

Collections

This text is part of the following collection of related materials.

Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

What responsibilities do I have when using this text?

When

Dates and time periods associated with this text.

Creation Date

  • November 30, 2009

Added to The UNT Digital Library

  • June 12, 2014, 7:50 p.m.

Usage Statistics

When was this text last used?

Yesterday: 0
Past 30 days: 0
Total Uses: 8

Where

Geographical information about where this text originated or about its content.

Place Name

Publication Place

Map Information

  • map marker Automatically generated Place Name coordinates.
  • map marker Automatically generated Publication Place coordinates.
  • Repositioning map may be required for optimal printing.

Mapped Locations

Interact With This Text

Here are some suggestions for what to do next.

Start Reading

PDF Version Also Available for Download.

Citations, Rights, Re-Use

United States. Government Accountability Office. Medicaid Outpatient Prescription Drugs: Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisition Costs, text, November 30, 2009; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc295788/: accessed October 23, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.