Retail Pharmacy Sues Over Medicaid

Two retail pharmacy associations filed a lawsuit this month against the U.S. Department of Health and Human Services here and the Centers for Medicare and Medicaid Service, Baltimore. Filed by the National Association of Community Drug Stores and the National Community Pharmacists Association, both in Alexandria, Va., the suit challenges the government-imposed reductions to drug reimbursements

WASHINGTON — Two retail pharmacy associations filed a lawsuit this month against the U.S. Department of Health and Human Services here and the Centers for Medicare and Medicaid Service, Baltimore.

Filed by the National Association of Community Drug Stores and the National Community Pharmacists Association, both in Alexandria, Va., the suit challenges the government-imposed reductions to drug reimbursements given to retail pharmacies for drugs purchased by Medicaid recipients.

The payment method, part of the Deficit Reduction Act of 2005, will use the Average Manufacturer Price (AMP) of drugs to establish a reimbursement formula.

The principal argument maintains that the rule violates the Social Security Act. “The act defines AMP as prices paid to manufacturers by wholesalers and pharmacies. The rule we are challenging includes many transactions that have nothing to do with that,” said Don Bell, legal counsel for NACDS, during a conference call. As it stands, AMP includes sales to patients and physicians, as well as to hospitals, surgical centers, mail-order pharmacies and insurance plan benefit managers, he asserted.

A study by the Government Accountability Office, Washington, found that, under the rule, retail pharmacies will be reimbursed, on average, 36% below acquisition cost for drugs.

The suit, however, is not all retail pharmacy is doing to prevent adoption of the method, which is set to go into effect in January. “We are pursuing a two-pronged approach,” said Steven Anderson, NACDS president and chief executive officer. While hoping to succeed in court, the associations are continuing to work with members of Congress on the passage of legislative solutions.

This includes a Washington-area advertising campaign to illustrate the urgency of passage this year of legislation introduced by Senate Finance Committee Chairman Max Baucus, D-Mont.; House Energy and Commerce Subcommittee on Health Chairman Frank Pallone, D-N.J.; and Representative Nancy Boyda, D-Kan.

“We would prefer to have legislation in place but would like to protect our rights in the meantime,” Bell said of the suit.

Although the Food Marketing Institute, Arlington, Va., is not participating in the suit, it did release this statement: “FMI is focusing on a legislative solution to this potentially devastating problem. FMI also supports the efforts of the National Association of Chain Drug Stores and National Community Pharmacists Association to resolve this issue.”

“Insurance plan benefits managers, wholesalers and many other groups have submitted comments that fall in line with our comments,” Bell said.