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Executive Summary

NADAS is seriously considering" taking the Health Care Finance Administration to court in order to put a halt to HCFA's plan to do away with pharmacists' earned discounts from Medicaid reimbursement, Natl. Assn. of Chain Drug Stores Chairman James Harrison (Harco Drug) told the assn.'s annual pharmaceutical conference in Chicago on Aug. 6. Noting that the industry is facing an Oct. 1 deadline for implementation of a new HCFA reimbursement policy by the states, Harrison said that NACDS "is actively reviewing and seriously considering the filing of a lawsuit against the Health Care Finance Administration." He added: "We continue to hope that such action will not be required, but it is very possible that HCFA will leave us no other alternative." The NACDS chairman declared that the industry "is looking down the barrel" at HCFA's Oct. 1 deadline for all state Medicaid programs to have switched away from average whsle. price (AWP) to actual acquisition cost (AAC) determining drug reimbursement. "Implementation of this program," Harrison maintained, "will have a devastating effect on all retail pharmacy providers." The assn.'s strategy for heading off the switch from AWP is to convince Congress to address review of the Medicaid reimbursement system in an upcoming appropriations bill, Harrison explained. "We hope to get Congress, through the appropriations process, to halt this unwarranted shift in a long-standing regulatory policy, so a new review of the Medicaid program can be conducted," Harrison said. "We have been able to create awareness in both the House and Senate of the need for significant reforms in the Medicaid program." NACDS Urges Increased FTC Role In Combating Drug Diversion By Reviewing Commerical Activities of Non-Profits NACDS has maintained in letters to state Medicaid directors that HCFA is violating the Administrative Procedures Act by initiating changes in regulatory policy without allowing for proposed rulemaking or providing an opportunity for public comment. ("The Pink Sheet," Aug. 26, T&G-6). ln addition, the NACDS letters asserted that the HCFA regional offices "have never been empowered with the authority to make changes in regulatory policy through administrative interpretation." Harrison noted that although it is "unlikely between now and Oct. 1 for Congress to approve an appropriations bill that would address our concerns. . .it still stands to be our best long-term hope of getting a new comprehensive review of the Medicaid program." In his speech, Harrison also addressed the problems associated with preferential pricing, including illegal drug diversion and anti-free market pressures. Noting that Rep. Dingell's (D-Mich,) House Energy and Commerce Subcmte. on Oversight and Investigation recently issued a report on the subject, Harrison said that the "chain drug industry shares Chairman Dingell's concern in terms of guaranteeing the legitimacy and integrity of the Rx products dispensed by our profession." Harrison said NACDS will recommend to Congress that the "scope of the Nonprofit Institutions Act be narrowed to clearly indicate that only bona fide charitable hospitals that are caring solely for indigent patients in the institutional setting be permitted to purchase drugs at a lower preferential price." Second, Harrison stated, the assn. also believes that "Congress must strictly define the term 'for own use' in order to stop excessive purchasing of pharmaceutical products by hospitals, HMOs, clinics and nursing homes, which are ultimately offered for resale." In addition, Harrison said the assn. will "ask Congress to require stronger regulatory enforcement by FDA and the U.S. Customs Service to guard against counterfeit medications entering the domestic market and to include surveillance of all imports, exports and re-imports." As another way to combat the "widespread abuses" under the Non-Profit Institutions Act, the chain drug exec reported that NACDS will urge Congress to give the Federal Trade Commission authority over the commercial activities of non-profit entities. "It is our belief that the FTC should be actively investigating this entire issue and prosecuting all violations of the law," Harrison declared. "And we will also recommend that the lnternal Revenue Service collect all taxas due on revenue from non-profit entities generated by their competing in the private sector with commerical operations." However, while recommending a bigger government presence in regulating non-profit institutions, NACDS will, in the meantime, "educate the Congress that the current drug distribution system works well and efficiently in bringing quality medications to consumers," Harrison said. NACDS "will further advise Congress that all forms of diversion are not illegal and that, in fact, this type of diversion can have an economic benefit to the consumer," the assn. chairman commented. Speaking from the same podium, Natl. Assn. Of Retail Druggists Exec VP Charles West also focused his comments on drug diversion and the revision of Medicaid reimbursement policy. Regarding the Medicaid changes, West said that the lobbying efforts by NACDS and NARD have at least delayed implementation of the new policy, thereby saving pharmacy "considerable funds." In addition, West said that the assns.' lobbying efforts have "salvaged present and future participation" in further decisions on Medicaid and third party reimbursement. On drug diversion, West noted that NARD will offer testimony in upcoming Dingell hearings this fall. He said that NARD has asked Congress to sponsor legislation that would return to the original intent of the Non-Profit lnstitutions Act.

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