Medicaid: States' Payments for Outpatient Prescription Drugs Page: 3 of 41
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based on drug type (brand or generic) and drug therapeutic class based on data we
obtained from First DataBank.8
To compare state Medicaid payments to selected market-based prices, we reviewed
how states' average payments compared to three prices that are based on actual sales
transactions-Average Manufacturer Price (AMP), Best Price, and Federal Supply
Schedule (FSS) Price. We selected AMP and Best Price because they are currently
used in the Medicaid program to calculate drug rebates;9 FSS Price was selected
because it represents prices available to certain federal government purchasers.
Table 1 provides descriptive characteristics of these prices. We obtained AMP and
Best Price data from CMS and FSS Price data from the Department of Veterans
Affairs (VA).10 We assessed the variation in the percent difference between each
state's payment and the states' average payment, to each of the market-based prices.
8Drugs that possess similar chemical structures and similar therapeutic effects are grouped into
therapeutic classes. Most drugs within a class produce similar benefits, side effects, adverse reactions,
and interactions with other drugs and substances.
9The Omnibus Budget Reconciliation Act of 1990, Pub. L. No. 101-508 4401, 104 Stat. 1388-143-1388-
161, established the Medicaid drug rebate program to help control Medicaid drug spending. Under the
rebate program, a pharmaceutical manufacturer pays rebates to states in order for federal payments to
be available under Medicaid for the manufacturer's outpatient drugs.
'oAMP and Best Price data are reported quarterly; we obtained data on both prices for all four quarters
of 2003 and calculated the average 2003 AMP and Best Price. FSS Price is reported based on a
contract period; if more than one contract was in place during calendar year 2003, we averaged the
available 2003 FSS Prices for the purposes of our analysis.
GAO-06-69R States' Medicaid Payments for Prescription Drugs
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United States. Government Accountability Office. Medicaid: States' Payments for Outpatient Prescription Drugs, text, October 31, 2005; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc302656/m1/3/: accessed April 25, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.