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.

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