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Executive Summary

MEDICAID Rx DISCOUNTS FOR GOVERNMENT are "totally unnacceptable," The National Association of Retail Druggists (NARD) reiterated in a resolution adopted at its annual meeting Oct. 2. The NARD House of Delegates resolved that the association "continue to oppose the concept of a discount" and "support the establishment by law of (1) marketplace pricing at the 90th percentile, and (2) a direct payment voucher system to reduce Medicaid administrative costs and assure prompt payment." The NARD resolution adopts a position similar to that of the Pharmaceutical Manufacturers Association (PMA). PMA has stated that it favors vouchers and marketplace pricing at the 90th percentile for Medicaid Rx drug reform. PMA also rejects the CIP and PhIP options proposed by the Health Care Financing Administration (HCFA) as burdensome and complex and prefers efforts to reduce administrative costs of Rx drug reimbursement ("The Pink Sheet" Sept. 22, p. 6). During a symposium on "Third Party Reimbursement: A Look at Cost of Goods," held at the NARD annual meeting, Purdue University's Pharmacy Administration Professor Emeritus, Robert Evanson, PhD, maintained that the CIP and PhIP programs "have a negative objective" and are "only one more step along the road to a flat acquisition cost base for all pharmacists which will spread to third party payors." The "only realistic alternative" to an ingredients cost standard that provides a built-in factor to cover the cost of losses not covered by other factors, said Evanson, "is a procedure which includes the cost of losses with a percentage net markup on cost for net profit." Evanson further cautioned pharmacists to "never let a third party program require a net acquisition cost as the cost of ingredients unless it provides a full net profit in its fee/markup schedule." Regarding the costs of services, he asserted that "a nonvariable, inflexible, flat-rate professional fee based upon imaginary costs is a great angle for reimbursers, but it can be an abomination to pharmacy practitioners." Pharmacists Shared Services President Michael Berryman predicted that government control through programs like CIP and PhIP could "eliminate profitability through interference in an active competitive market." He suggested that "low generic prices currently available" might provide cost containment incentive without the stifling effect of government involvement. The National Association of Chain Drug Stores (NACDS) said it will propose to HCFA "a variation of CIP that will take advantage of marketplace competition and increased availability of low-cost generic drugs to permit substantial government savings in the Medicaid drug program while still permitting efficient pharmacies to realize a reasonable profit." NACDS said its recommendation is based on the fact that the Medicaid guidelines for Rx drug reimbursement require that a "dispensing fee should cover the operating costs of a pharmacy, encourage efficient and complete services, and provide the pharmacist a reasonable return on his investment." University of Chicago Law Professor Paul Bator, who conducted a Medicaid analysis for NACDS, submitted a memorandom Oct. 1 to HHS, stating: "The dispensing fee was originally intended to ensure efficient pharmacists a reasonable profit, yet state-set dispensing fees have failed to keep pace with inflation and HCFA has failed to exercise its statutory responsibility to require states to remedy the defect." If HCFA decides that requiring regular dispensing fee adjustments is too difficult, he added, it must select some other reimbursement formula which allows efficient pharmacies' Medicaid business to be reasonably profitable.

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