Government Accountability Office report on Average Manufacturer's Price (AMP)

On November 30, 2009, the U.S. Government Accountability Office (GAO) released a report http://r.listpilot.net/c/aphanet/4tswaz9/244d2 on the effect of average manufacturer's price (AMP) reimbursement formula on Medicaid outpatient prescription drugs for the second quarter of 2008.

The purpose of this report was to compare the federal upper limits (FULs) for reimbursement with average retail pharmacy acquisition costs. The GAO report found that "if AMP-based FULs had been in place in the second quarter of 2008, they would have been lower than average retail pharmacy acquisition costs, in general".

Specifically, the GAO found that for the second quarter of 2008:

* The median AMP-based FULs would have been lower than average retail pharmacy acquisition costs for 54 of the 83 drugs in the GAO sample;

* 44 drugs, from the GAO sample, had FULs that would have been at least 25% below acquisition costs;

* In the aggregate, the FULs would have been 17% lower than acquisition costs, though the difference varied significantly by state, from 57% lower to 49% higher;

* 64 drugs had at least one therapeutically equivalent version with acquisition costs below the FUL, indicating that pharmacies may be able to substitute lower-priced therapeutic equivalents to bring their costs below the FUL;

* For 38 drugs, AMP-based FULs varied significantly throughout 2008, and in some cases exceeding the average retail pharmacy acquisition cost one month and falling below it in another month; and

* Variation occurred because manufacturers did not report AMP data each month for 11% of the therapeutically equivalent versions of the drugs in the GAO sample.

The Centers for Medicare and Medicaid Services (CMS) provided written comments on the draft of this report, disagreeing with the report's findings and noting that:

* GAO's data source used to estimate average retail pharmacy acquisition costs did not take into account discounts and rebates that drug manufacturers may provide to retail pharmacies; and

* There were methodology and inconsistencies between GAO findings and the findings of a Health and Human Services (HHS) Office Inspector General (OIG) report (which was provided to the GAO by HHS but has not been released to the public yet).


APhA (American Pharmaceutical Association) continues to work with National Association of Chain Drugs Stores and the National Community Pharmacists Association to ensure appropriate pharmacy reimbursement in the Medicaid program. In particular, both the House and Senate health care reform bills include provisions to modify the AMP reimbursement formula, and while imperfect, we support the Senate's version of these provisions.

APhA's complete comments to the House and Senate Leadership on merging the health care reform bills http://r.listpilot.net/c/aphanet/4tswaz9/244ti are available.


Pro Pharma will provide updates on any new developments.

Craig S. Stern, PharmD, MBA
President
Pro Pharma Pharmaceutical Consultants, Inc.

The Employers Health Care Coalition of Los Angeles

The Employers Health Care Coalition of Los Angeles now has a web site! Please visit us at http://www.lahealthcoalition.org/

A Pharmacist’s Plan

A pharmacist jumps into the health care debate with a series of ideas and proposals to both improve health care and lower costs.

In the current economic environment, healthcare reform is front and center; especially among the uninsured, and those who have to pay for insurance or care (high costs and accelerating costs). While other healthcare stakeholders have presented their programs to improve care and control cost, pharmacy has been strangely silent. Yet, pharmacists are drug experts and have at least three times more face time with patients than any other healthcare specialist. As a pharmacist and a healthcare professional, I would like to offer a program where pharmacists offer their expertise to improve care and lower costs.

The elements of this plan are:

1. Initiatives to improve care and provide optimal outcomes:

a. Identify issues of coordination of care due to multiple treating practitioners and notify the practitioners involved with a simplification plan

b. Identify and decrease the use of redundant and multiple drugs, that lead to adverse effects and unnecessary drug interactions

c. Identify issues with compliance in therapy and implement training programs for patients to improve their overall compliance with their therapeutic regimen.

d. Establish systems to identify and correct medication errors.

e. Establish systems to identify and correct problems with dosing, and how drugs are taken. Pharmacists have a multitude of anecdotes of direct patient improvements in these areas and these examples can, and should, be teaching moments for patients and practitioners.

f. All of the above are elements of clinical pharmacy practice and within the expertise and skill level of every Doctor of Pharmacy.

2. Initiatives to provide cost savings on every prescription by educating the patient and the practitioner on:

a. Switches to generics of the prescribed drug if possible, or to a generic in the same therapeutic category so that the patient avoids brand copay and the health plan/employer purchaser pays a lower fee.

b. Switches to a lower cost brand in the same category if a generic is not available.

3. Let patients know about lower cost options.

a. Establish a usual retail price for cash paying patients that is based on cost as an understandable and reasonable measure for the health plan/employer purchasers and patient. Publicize the “transparent” benefits to purchasers, patients and practitioners.

b. Provide the discounted generic retail price and publicize the avings to health plan/employer purchasers, patients and practitioners.

c. Publicize examples of improved outcomes and risk avoidance to demonstrate that lower cost initiatives result in better quality care.

All of the above actions are available today and can be implemented with minimal effort. The onus is on the pharmacist to declare to patients, purchasers/employers that the pharmacist who was sensitive to your costs is the same person who can solve your therapeutic problems. When patients and purchasers demand these initiatives, the solutions will follow.

How the 9/26/09 AWP Calculation Change Affects Pharmacy Profit

Click on chart to enlarge picture

As you can see from the chart above a pharmacy submitting a claim for a drug with a $1000 AWP before the 9/26/09 AWP calculation change (WAC x 1.25) would make a $30 profit above WAC. If their contract discount does not change, after the conversion to the WAC x 1.20 calculation, they would lose $3.33 (below WAC). In order to keep the pharmacy profit approximately the same the discount off of AWP would have to change to about 13.568%.

This primarily affects Brand Name drugs since most generics are priced at lesser of MAC, U/C, or advertised discounts. The pharmacy would be affected on a generic drug that was not priced at “lesser of” but the profit structures on generics are vastly different than brands. Actual costs or WACs of generics are much, much less than the chart above indicates. Pharmacies were allowed to gain a profit advantage on generics in order to initiate, promote and reward switching.


Developed by Barry Pascal, PharmD, Pro Pharma Pharmacist

AWP update

Several clients have asked about what to do with the change in AWP when they receive calls from pharmacies complaining about reimbursement. Many clients have signed amendments to their agreements that allow the PBM to change the AWP or to change the AWP discount. Please consider the following when you receive complaints from pharmacies:

• Ask the PBM to review the pharmacy/PBM agreement (possible in pass through contracts) to ensure that the AWP change is consistent between what was promised by the PBM and what is being paid to the pharmacy; namely, if the pharmacy is to be kept whole, then the pharmacy contract should reflect the same language and AWP calculation as in the amendment that the purchaser signed with the PBM.
  
• Make sure that you have the specific telephone number at the PBM to refer pharmacy complaints.
  
• Ask the PBM for a report every month of the number and nature of pharmacy complaints regarding AWP changes, and determine if the complaints are being handled to your satisfaction.
  
• Ensure that the formulas used by the PBM for calculating AWP are fixed and does not change for the term of the contract with the purchaser.
  
• Please remember that the only gold standard for the AWP is the one that is published by the manufacturer. Everything else is a calculation and may not reflect the same AWP. As a result, the pharmacy computer system may, or may not, have the same AWP as the PBM.
  
• Closely monitor your invoices and supporting claims for the impact on cost inflation.
  
  

Please call if you require clarification or need assistance.

Be well,
Dr. Craig Stern

Patient Savings Ideas

1- Time savings
…..a) Trips to Pharmacy –
……….i) Order refills 5 days early
……….ii) Go to pharmacy in the off hours not the busy hours
……….iii) Ask if pharmacy has free delivery
……….iv) Ask pharmacy to call MD to get new RX as early as possible
…..b) Ordering
……….i) Auto refills
……….ii) Asks the pharmacy to get refill OKs from the MD for you
……….iii) Write order date in calendar when you pick up your medicine
……….iv) Ask MD to fax new RX to your pharmacy
2- Dollar savings
…..a) Switch to Generic
…..b) Switch to less expensive generic (i.e. Levothroid to Levothyroxine)
…..c) Pill splitting
…..d) Buy discounted category of drugs
…..e) Ask your pharmacy if they will match prices
3- Good Medicine
…..a) Ask the MD when Patient needs next blood test due to meds and make appt
…..b) Ask when MD needs to see patient re-next MD appointment
…..c) Ask MD what are the side effects and what to do about them/or reduce them
…..d) Ask Pharmacist what are the side effects and what to do about them/or reduce them
…..e) Educate
……….i) Look up drug on the internet and become familiar with dosages, side effects, effects, etc
……….ii) Read about condition and/or drug
……….iii) Know the symptoms of common recurring diseases like cold vs flu
…..f) Take steps to reduce condition
……….i) Specific Steps
……………1) Dry skin- use moisturizer, take <5 min showers
……………2) Diabetes- monitor protein and sugar intake
……………3) Overweight – gym, walk, etc
……………4) Diabetes- blood tests
……………5) Asthmatics use Aero Chamber
……….ii) Call MD as soon as possible when conditions worsen
……….iii) Wash Hands-
……………1) sneeze in sleeve
……………2) Avoid crowds
……………3) Use hand cleanser
……….iv) Take medicine as prescribed
…..g) Take steps to reduce side effects
……….i) If makes sleepy take at night
……….ii) If increases appetite- monitor intake or diet

Pictures from PBMI AWARD

Pro Pharma Pharmaceutical Consultants receive prestigious
Best In Class Award at PBMI (Pharmacy Benefit Manager’s Institute)


Award at PBMI: Craig Stern, PharmD gives
acceptance speech at PBMI Awards ceremony

PBMI Award Recipients – left to right:
Danny Moriarity (Peabody Energy)
Mary Kohlmiller (Patriot Coal)
Carol Stern, RN(Pro Pharma CEO)
Craig Stern, PharmD (Pro Pharma President)

New Pro Pharma Web Flash Site

Welcome to the Pro Pharma Blog!

Welcome,

In the coming days you will meet the professor of Pro Pharma Pharmaceutical Consultants, Inc. Dr. Craig Stern will update you on current Pharmacy Benefit news and trends. Most importantly, you will be able to ask him any questions related to this topic and receive a quick and accurate answer! Please feel free to leave your questions and comments!