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Executive Summary

HCFA's MEDICAID PROGRAM, LIKE MEDICARE, SHOULD RECOGNIZE AWP in determining pharmaceutical reimbursements for pharmacies, Louisiana's delegation to Congress maintained in a jointly-signed letter to Health Care Financing Administration chief William Roper, MD. The federal legislators asked that HCFA reconsider its "decision to disallow the use of an unmodified average wholesale price (AWP) as the state's best estimate of estimated acquisition cost (EAC) levels." The delegation pointed out that in passing the Catastrophic Care Act under Medicare, "Congress and the President endorsed the validity of using AWP as a benchmark in determining reimbursement levels for drug products." The new law "permits HCFA to base their reimbursement determination on either (1) published AWPs or (2) a biannual survey of wholesale prices," they said. Furthermore, the act "specifically states that the prices determined in the survey shall not take into account any discounts received by pharmacies," the delegation noted. "Surely it is reasonable to extend these guidelines to the Medicaid program as well." Louisiana's state Medicaid agency appealed HCFA's position at a hearing last week at the Dallas headquarters of the federal agency's Region VI. HCFA, which will subsequently issue a ruling, objected to Louisiana's reimbursement formula on the grounds that published AWPs are inflated ("The Pink Sheet" Sept. 5 T&G-6). The federal agency can withhold matching federal funds from a state whose policies it finds wasteful. The legislators said they "support prudent measures to control the cost of the Medicaid program, [but] we are concerned that the potential impact of your preliminary decision could threaten the continued viability of many small, independent pharmacies that serve a large number of Medicaid patients." If unmodified AWP is disallowed as the basis for reimbursement, "pharmacists will be denied the possibility of receiving their earned discounts," the delegation continued. "Retained discounts allow pharmacies to recover some of the costs not adequately covered in dispensing fees that have not kept pace with inflation." The letter was signed by the entire delegation: Democratic Senators Johnston and Breaux; Democratic Representatives Boggs, Huckaby, Tauzin, and Hayes; and Republican Representatives Livingston, Holloway, Baker, and McCrery.

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