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HCFA SHOULD HOLD OFF MEDICAID Rx DRUG REIMBURSEMENT CHANGES

Executive Summary

HCFA SHOULD HOLD OFF MEDICAID Rx DRUG REIMBURSEMENT CHANGES until it accepts the report of drug reimbursement regs, the Small Business Administration (SBA) recently wrote HHS' Health Care Financing Administration (HCFA). SBA Chief Counsel for Advocacy Frank Swain urged HCFA "that no action. . .be taken until the report of the task force appointed by Secty. Heckler has been reviewed; then, if a change in regulations is necessary, the agency should institute a rulemaking and observe all appropriate administrative procedures, including the Regulatory Flexibility Act." The SBA letter parallels the position of the Natl. Assn. of Retail Druggists (NARD), the Natl. Assn. of Chain Drug Stores (NACDS), APhA and other natl. pharmacy assns. NARD, which has been working closely with Swain in its efforts to stop HCFA from eliminating pharmacy "earned discounts" through new "cost-saving" Rx drug reimbursement formulas, and NACDS have pursued their fight against HCFA via testimony and intense lobbying in Congress. Both assns. are encouraging state Medicaid agencies to resist any HCFA regional "pressuring" for changes in reimbursement formulas (see related T&G). ln addition, NARD, NACDS, APhA and other natl. pharmacy assns. recently have been meeting informally about once a month with HCFA officials in Washington to explain the economics of pharmacy business practices and the effect that any new reimbursement policy would have on pharmacy's ability to serve Medicaid patients. Swain's letter notes that the Average Whsle. Price (AWP) is a published list price "that is not adjusted to reflect discounts that pharmacists may receive for good business practices, such as prompt payment, volume purchases, or payments in cash." Swain also pointed out the HHS Office of the Inspector General's (OlG's) conclusion that eliminating the use of AWP would result in annual savings of $128 mil. "Given the significant effect that such a reduction in reimbursements could have upon the many small retail pharmacists participating in the Medicaid drug program, HCFA should ensure that any changes in regulations of policy are achieved through proper administrative procedures," Swain's letter declares, adding: "To the extent that HCFA mandates a particular method for determining EAC ]Estimated Acquisition Cost[ or effectively removes states' discretion to assess the EAC, the Administrative Procedure Act's notice and comment procedures, as well as the Regulatory Flexibility Act, may apply."

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