Retail pharmacy's future depends upon adequate reimbursement rates and profitability.
The passage in March of the Patient Protection and Affordable Care Act, coupled with the Health Care and Education Reconciliation Act, are characterized as making the most sweeping changes to health care since Medicaid and Medicare was enacted 45 years ago. Health care reform promises to alleviate some of the reimbursement and margin pressures pharmacies have faced due to a complicated system of metrics and rules used to determine reimbursement rates and a complex and changing regulatory environment.
One example is the Deficit Reduction Act of 2005 (DRA). Under the law, a new metric — Average Manufacturer Price — was introduced to set federal upper limits to determine maximum pharmacy reimbursement for generic drugs under Medicaid. Implementation of the rule would have reimbursed pharmacies below their acquisition cost for Medicaid generic drugs if the National Association of Chain Drug Stores and the National Community Pharmacists Association, both based in Alexandria, Va., hadn't stepped in to challenge the law and the Centers for Medicare and Medicaid Services (CMS) rule making for implementation of AMP. The court put the issue on hold in 2007 through an injunction. The rule still exists and the injunction is still in place. However, it is hoped the health care reform law will supersede the DRA statute.
In a series of webinars produced by the NACDS for its members on the impact of health care reform, NACDS pointed out that the injunction against implementation of the AMP rule saved the industry $5.5 million per day, or a total of $4.5 billion from Jan. 1, 2008, to the present.
Under the new health care reform law, the AMP definition is improved and accepted by retail pharmacy because it is based upon manufacturers' sales to retail pharmacies and does not include sales outside the retail class of trade as in the DRA. It also orders CMS to set the Medicaid Federal Upper Limit (FUL) for reimbursement of generics at a rate of “no less than 175% of average weighted AMP.”
“Health care reform is a dramatic improvement to DRA reimbursement policy,” said Julie Khani, NACDS vice president, public policy, during the webinar. “The ‘no less than’ language is an important component and provides flexibility to CMS. CMS has the ability to go above 175% for whatever reason they chose. … We do have the opportunity to go to CMS when and if a multiplier greater than 175% should be used to determine an FUL,” she added.
The health care reform bill requires the secretary of the Department of Health and Human Services to implement the new Medicaid generic rates as early as October of this year. However, NACDS said it didn't expect the process would necessarily happen that quickly.
The good news for retail pharmacy is health care reform will provide coverage to 32 million people who do not have coverage. Of those, 16 million will be eligible for coverage through Medicaid by 2014. The expanded Medicaid eligibility is estimated to result in 76 million prescriptions annually and approximately $7.2 billion in revenue, according to NACDS.
However, under reform, funding for Medicaid will put more of a burden on states that are already struggling with deficits and a poor economy. States can expect to pay more dollars to cover Medicaid, and to see fewer dollars from drug rebates that are paid by manufacturers to get placement on Preferred Drug Lists. Those rebates are shared by the federal and state governments.
NACDS noted the possibility of some states shifting populations into Medicaid. For example, some states like Connecticut that provide coverage to individuals not through Medicaid but through state programs may find people in those programs are now eligible for Medicaid but they weren't before health care reform.
Connecticut has applied for a state plan amendment to expand into Medicaid earlier than 2014 and move 45,000 individuals into Medicaid who are now in a state-assisted program. By doing so, Connecticut could save $53 million over the next 15 months, NACDS noted. Other states that might consider expanding into Medicaid are Maine, Massachusetts, New York, Pennsylvania, Washington and Wisconsin, and the District of Columbia.
EXPANDS OTHER SERVICES
The health care reform legislation also incentivizes retail pharmacists to take a greater role in patient health management through medication therapy management services for which there will be grant programs available to test new methods to help curtail the estimated $290 billion in health care expenditures that result from inappropriate medication use or noncompliance with taking medications.
This is particular critical for those trying to manage chronic illnesses and will include pharmacists' roles in accountable care organizations, medical home, “transitions of care” teams and mediation reconciliation activities. However, NACDS cautions that the grant process will take time to launch and will be subject to the annual appropriations process.
The health care reform bill also provides an exemption for most pharmacies from what is considered burdensome accreditation requirements to provide durable medical equipment to Medicare patients, and changes current law so that those pharmacies still needing to obtain accreditation have until January 2011 to do so. Pharmacies that want to competitively bid would still be required to be accredited regardless.
Those pharmacies already accredited under CMS guidelines are exempt from the re-accreditation requirements if they meet specified criteria, saving significant dollars and hours to comply.
Retail pharmacy can also expect to benefit from the health care reform bill's effort to close the Medicare Part D “doughnut hole” over the next 10 years, through new federal funds as well as discounts from pharmaceutical manufacturers on brand-name drugs. Beneficiaries that hit the “doughnut hole” this year would receive a one-time $250 rebate. Beginning Jan. 1, 2011, beneficiaries would also automatically receive a 50% discount off the negotiated price for brand-name prescription drugs that are covered under Part D and covered by their plan's formulary or are treated as being on plan formularies through exceptions and appeals processes. These discounts would be provided by the pharmacy at the point of sale.
The discount increases to 75% on brand-name and generic drugs by 2020. The bill also allows 100% of the negotiated price of discounted drugs (excluding dispensing fees) to count toward the annual out-of-pocket threshold that is used to annually define the coverage gap. Beginning in 2020, the 25% copay applies until Medicare's catastrophic coverage kicks in.
Pharmacists can expect to see those that fall into the “doughnut hole” better able to purchase their full medication regimen as prescribed.
The law requires that these brand-name manufacturer discounts be paid to the pharmacy by a third-party entity under the contact with the secretary. A new prompt pay provision applies to the payments that third-party entities would have to make to pharmacies. That means that pharmacies should be paid no later than 14 or 30 days after dispensing the brand-name drug.
It remains to be seen how the health care reform legislation plays out in the marketplace and the ability of states to fund programs. Regardless, retail pharmacy was an important player in the debate and has been recognized for the health care services it can provide and ultimately help bring down health care costs.
“Accurate payment for dispensing has become even more important. We have policy makers that clearly believe that pharmacy reimbursement for product to be as close to the cost as possible. It is incumbent on all of us to make sure payment of dispensing is reflective of the true cost of dispensing,” said Khani in the webinar on the expansion of Medicaid eligibility.