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MULTIPLE-SOURCE Rx DRUG REIMBURSEMENT UNDER MEDICARE SHOULD BE BASED ON MEDIAN AWP, PURDUE PHARMACY PROF SCHONDELMEYER MAINTAINS

Executive Summary

Reimbursement levels for multiple-source prescription drug products under Medicare should be based on the median average wholesale price, Purdue University's Pharmaceutical Economics Research Center Director Stephen Schondelmeyer, PhD, concluded in a report prepared for the Senate Finance Committee. Adoption of a formula based on the median AWP for products within each multiple-source drug category "appears to provide the best overall approach" to reimbursements for prescription drugs under Medicare, the report maintains. The median AWP formula "will assure fair and predictable prices for multisource drug products purchased under government-sponsored health care programs, and pharmacists will receive fair and equitable payment for the drug products dispensed," the report contends. Schondelmeyer made his recommendation in a report entitled "Impact of Alternative Reimbursement Limits for Coverage of Multisource Prescriptions under Medicare." The congressional committee asked the Purdue professor to compare the Senate and House versions for reimbursing generic drugs under Medicare in terms of costs and product availability. Reimbursement for multiple-source products would be based on 50% of the brandname product's AWP under House-passed legislation and on 150% of the lowest priced generic product's AWP under Senate-passed legislation. The difference in the two formulas is one of the key issues that must be reconciled by House and Senate conferees before Medicare catastrophic care legislation can be enacted. The Schondelmeyer report examines the top 100 multiple-source prescription drugs used by people aged 65 and over, as identified by the National Ambulatory Medical Care Survey. Data from IMS America was consulted to determine the most frequently prescribed dosage form for each entity and the strength and package size most frequently purchased. AWPs figures were taken from the Medi-Span Generic Buying & Reimbursement Guide. The House formula would produce the highest reimbursement rates for 62 of the top 100 multisource drugs, the report states. The Senate formula would produce the top levels for 23 drugs. On the other hand, the report notes formulas based on the median AWP and the mean generic AWP would produce the highest price ceilings for 12 and three drugs, respectively. In terms of overall estimated Medicare drug program expenditures, costs under the House reimbursement formula would be $714 mil., approximately $115 mil. more than the estimated $599 mil. cost under the Senate formula. However, overall estimated program costs would total $627 mil. based on mean AWP payments and $621 mil. based on median AWP reimbursement levels. Schondelmeyer estimates average prescription drug costs to be $11.87 under the House formula, $9.87 under the Senate plan, $10.34 based on mean AWP, and $10.23 based on median AWP. The report argues that "the formula chosen for the Medicare coverage of multisource prescriptions should also be applied to the Medicaid program" for the sake of "consistency" between the programs. The report urges that the Medicaid program payment limits should be changed if the Senate formula is not adopted for Medicare.
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