WASHINGTON--Calling it 'an absolute travesty,' the National Community Pharmacy Association said that CMS' final rule on Medicaid drug payments could cause thousands of pharmacies to close their doors.

Issued July 6 under the Deficit Reduction Act, the rule would reduce Medicaid reimbursements for generic prescription drugs, which represent an average 23 percent of business for the typical community pharmacy, according to Charles Sewell, NCPA's senior vice president, government affairs.

Sewell said Medicaid's new payment formula, based on average manufacturer price, will cause pharmacies to be paid well below their acquisition cost for the drugs. He pointed to a study by the Government Accountability Office last year that said the rule would pay pharmacies an average 36 percent less than their acquisition cost.

"We're being asked to lose money on almost every generic we dispense," Sewell said in a phone conference on Wednesday.

He estimated that 2,300 NCPA members would have to close their doors in early 2008 because of the rule, which will take effect Jan. 30, and said it will be difficult for thousands more to remain in business if they are heavily reliant on Medicaid revenues. For 10 percent of community pharmacies, he said, Medicaid represents 50 percent of their business.

"What this means for the patient is that we are just not going to be there," Sewell continued. "And if we're not there, the costs are going to go up considerably because these poor patients are going to be left with one choice for their health care needs, which is usually heading toward the emergency room."

According to NCPA, the majority of community pharmacies are located in rural or underserved areas where much of the Medicaid population resides.

To make matters worse, Sewell said, because pharmacies will lose money dispensing generics, CMS' new rule has "created a perverse incentive to dispense brand, and that's certainly not in the taxpayer's best interest." Sewell said that in Medicaid--which has "one of the worst generic rates out there"--a brand average price is $155 versus $21 for the average generic.

In a press release accompanying the rule, CMS said its new policy is "aimed at reigning in inflated drug product payments." The new regulation is expected to save states and the federal government $8.4 billion over the next five years.

According to CMS, both the GAO and HHS Office of Inspector General found that Medicaid payments to pharmacies for generic drugs were "much higher than what pharmacies were actually paying for those drugs" because the states were using commercial drug pricing guides as the basis for setting reimbursement levels.

Sewell said NCPA is working on legislation that should be completed shortly to "fix" the rule. The group's proposal would base reimbursement on actual retail cost, not on the AMP, and would create a transparent system where retail drug acquisition costs would be readily available. NCPA also hopes its proposal will cause a move to more generics in Medicaid.

According to Bruce Roberts, RPh, NCPA vice president and CEO, "If the current policy is fully implemented, community pharmacies will be forced to make the impossible choice of turning their backs on vulnerable patients by dropping out of the Medicaid program or continuing in a program that threatens to bankrupt their businesses."

While the rule was issued as final, CMS has asked for further public comment.

For a CMS press release on the final rule, click here.

To view comments from the NCPA, visit www.ncpanet.org.

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