Medicaid is overpaying for prescription drugs, and may enact a new policy that will reduce percription reimbursements, according to the Prior Office of Inspector General and reported on by Fulbright:
On Oct. 16, 2012, OIG released a report finding that although Medicaid is overpaying for prescription drugs under current policy, a new policy in the Patient Protection and Affordable Care Act (“PPACA”) could reduce drug reimbursements under Medicaid. The study, titled “Analyzing Changes to Medicaid Federal Upper Limit Amounts,” compared Federal Upper Limit (“FUL”) amounts for some drugs based on published prices to FUL amounts based on a new reimbursement policy in PPACA. PPACA revised the FUL amount to be no less than 175 percent of the average manufacturer price (“AMP”) paid by drug wholesalers to manufacturers. In February, the Centers for Medicare and Medicaid Services (“CMS”) proposed a rule that would require FUL reimbursement rates to follow AMPs. Since that time, CMS has based FUL amounts on 150 percent of the published price.
OIG found that FUL reimbursement amounts based on the published prices of drugs were four times higher than the amount pharmacies paid for the drugs. However, when examining the costs to Medicaid if FUL reimbursements were based on AMPs, the OIG found that the reimbursements were 61 percent lower than the FUL reimbursements based on published prices but still exceeded pharmacy acquisition costs by 43 percent. The study concluded by recommending that CMS finish implementing the policy mandated in PPACA to set reimbursement based on AMPs.