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HIGH-VOLUME PHARMACY DISCOUNT PROVISION

Executive Summary

HIGH-VOLUME PHARMACY DISCOUNT PROVISION in the Senate Catastrophic Care Bill is the number one target for the National Association of Chain Drug Stores, which will ask House-Senate conferees to delete the provision from the final legislation. In a "talking points" document NACDS is distributing on Capitol Hill to staffs of the various conferees, the association maintains that the provision "reflects unnecessary redundancy to the numerous cost containment features" otherwise contained in both the Senate and House bills. The NACDS paper further contends that the provision represents "bad economic and public health policy that penalizes efficient providers in the competitive marketplace and rewards inefficient purchasing and dispensing." If enacted the provision could have the adverse effect of causing efficient operations either to withdraw from participation in the program or to raise prices for private-pay patients to compensate for discounted reimbursement from the Medicare program. NACDS favors a phase-in of covered drugs, as proposed in the Senate measure, but otherwise prefers the House bill (HR 2470). The Senate bill (S 1127) permits HHS to discount payments made to "high-volume pharmacies" for outpatient prescription drugs dispensed under Medicare. The provision authorizes HHS to define "high volume" and to set the discount. The Senate bill's discount provision was suggested to staff of Sen. Heinz (R-Pa.) by the New Jersey state Medicaid agency. Since 1976, reimbursements under the state's Medicaid program have been discounted by up to 6% off published AWPs. The particular discount varies according to the prescription drug volume of each pharmacy. New Jersey chief pharmacy consultant Sanford Luger says that the state discount formula (also employed by New Jersey's Pharmaceutical Assistance for the Aged and Disabled program) is based on the principle that retailers with larger volumes of business acquire inventory at greater wholesale discounts and that those discounts should be passed on to the large volume retail purchaser (the state). Pharmacy participation in the New Jersey program has remained high, averaging about 98%, Lugar maintains. The discounts are not deep, and the average dispensing fee is $ 3.81. The state also limits payments to the lower of cost plus fee or usual and customary price. NARD's position on the Senate provision is similar to NACDS in that the independent retailers association favors the House bill and is seeking deletion of the Senate high volume provision. NARD is opposed to the provision on the same principle that it opposed an HHS proposal to prevent state Medicaid programs from basing drug reimbursements on list AWPs. NARD said that 1985 proposal would have appropriated pharmacies' "earned discounts" for prompt payment and other efficiencies. NARD supports one aspect of the Senate bill. NARD is endorsing provisions in S 1127 for at-home intravenous care. The House measure would cover home-use I.V. drug products (including anti-infectives, anticancer agents, and immunosuppressive drugs). However, the Senate version covers those products and in addition covers attendant supplies and costs for administering the drugs. Many retail pharmacists are expanding their practices to include home health care services. The American Society of Consultant Pharmacists also is seeking deletion of the high volume provision. On the other hand, ASCP has said the Senate version "overall appears to be the most reasonable in benefits, funding, and reimbursement." In particular, the association supports the Senate bill's gradual phase in of covered products and home I.V. drug therapy coverage. The American Pharmaceutical Association is seeking amendment, not deletion, of the high volume provision. APhA supports oversight of prescription drug reimbursement levels, but on the condition that oversight authority is retained by Congress, and not delegated to the Health Care Financing Administration. Congress should define "high volume" and set appropriate discounts based on data and advice from HCFA, APhA says. The American Society of Hospital Pharmacists is neutral on the House and Senate bills and has declared no official position on any particular provision. The Pharmaceutical Manufacturers Association has endorsed the Senate bill generally, but it has no position on the high volume provision. The National Wholesale Druggists Association favors the House measure, but has no official opinion on the discount provision.
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