Generic News

Critics Say Medicaid’s New Cost Formula Falls Short

The National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) each sent letters to the Centers for Medicare & Medicaid Services (CMS) in October criticizing the agency for its approach to the ongoing overhaul of Medicaid’s pharmacy reimbursement model.

In September, CMS released a list of draft federal upper limits (FULs) that cap the amount pharmacies can be reimbursed for generic drugs under Medicaid. The new draft FULs are calculated as a percentage of average manufacturer price (AMP), a pharmaceutical industry benchmark the pharmacy groups say is both unregulated and inaccurate.

“AMP is not a price paid in the marketplace,” NACDS wrote, adding that an analysis by one of its members showed that more than half of the draft FULs are below retail pharmacies’ actual acquisition costs. Because CMS has yet to determine how manufacturers should define AMP, officials say the values—and by consequence, FULs—vary widely.

NACDS maintains that the draft FULs CMS released in September “should neither be made available for nor used as a basis for pharmacy reimbursement.” Both NCPA and NACDS agree that the numbers should be recalculated and republished after a final AMP rule is in place. Failure to do so could spell trouble for pharmacies, health plans, and Medicaid patients, they said.

Publishing lowball values before an AMP rule is finalized “could result in additional health plans adopting a flawed reimbursement standard,” according to NCPA. Independent pharmacies would be disproportionately impacted by inadequate Medicaid reimbursements, as they already have higher acquisition costs than national chain drugstores, the group noted.

The health care reform law gives CMS the authority to calculate FULs at no less than 175% of AMP; however, the agency can increase that number at its discretion. “Based on analysis of the draft FUL list, it appears that at least initially, CMS may need to increase the multiplier for calculating all FULs,” NACDS wrote.

GPHA: To Sustain Health Care, Don’t Cut FDA Funding

Funding the activities of the FDA and its Office of Generic Drugs (OGD) is critical to ensure access to affordable medicines and reduce health care spending nationwide, the Generic Pharmaceutical Association (GPhA) told lawmakers in October.

“At a time when lawmakers in Washington and across the country are under enormous pressure to cut budgets and reduce spending, we applaud the Committee’s foresight in recognizing the importance of a fully funded FDA,” said Ralph G. Neas, GPhA’s president and chief executive officer.

According to the FDA, more than 2000 generic drug applications are currently awaiting action by the OGD, and as many as 365 are for first-time generics. Cuts to FDA’s budget would worsen the bottleneck, delaying generic launches even as consumers and the government pay the premium for branded drugs, GPhA noted.

A recent analysis by IMS Health found that generics saved the US health care system $931 billion in the past decade and $158 billion in 2010 alone. For those savings to continue— and for entitlement programs to survive in the longterm—current funding levels for the FDA must be upheld, according to Neas.

“The sustainability of our health care system, including vital programs like Medicaid and Medicare, is absolutely dependent on the savings generated through the use of generic drugs,” said Neas.

US Senators Call For Ban on Pay-to-Delay

Senators Herb Kohl (D, WI) and Chuck Grassley (R, IA) joined the chorus of voices calling for an end to patent settlements—payments brand drug manufacturers make to generic competitors in exchange for their promise to keep generic alternatives off the market.

In an October 13 letter to the Joint Select Committee on Deficit Reduction, the senators urged lawmakers to include the Preserve Access to Affordable Generic Drugs Act (S 27) in their strategy to tackle the nation’s debt. The panel, also called the “Super Committee,” will report its recommendations on November 23.

The bill championed by senators Kohl and Grassley gives the US Federal Trade Commission the authority to prohibit pay-to-delay settlements. Although generic drug makers are fiercely in favor of the deals, critics say banning them would increase generic competition and, ultimately, save the federal government money.

A report by the Congressional Budget Office estimated that the proposed legislation would save the government $2.68 billion in 10 years—just a fraction of the $1.5 trillion in budgetary savings that the Super Committee aims to achieve in the next decade. “It won’t solve our fiscal problems, but every little bit helps,” Grassley said. PT