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Executive Summary

MEDICAID USE OF "UNMODIFIED" AWP'S WOULD OBVIATE PRICE MONITORING, the American Pharmaceutical Association contended in Sept. 21 comments to the Health Care Financing Administration. Average wholesale price "is, in fact, representative of and sensitive to the drug marketplace," APhA said: "Any other system of price monitoring would require extensive and ongoing research of each individual pharmacy and its purchasing and accounting procedures." "No bureaucracy is needed to monitor" published AWPs, APhA argues, because "competition among pharmacies and suppliers prevents artificial inflation above actual costs. Louisiana has chosen to spend the funds that would be necessary to administer a monitoring system for drug product prices in more efficient ways. They should be allowed to make that choice." The association's comments respond to a recent HCFA hearing on whether Louisiana's Medicaid program can base estimated drug acquisition costs on published AWPs. HCFA has argued that published prices are inflated and are not actually paid by retailers due to discounts. "There is nothing in the [definition of 'estimated acquisition cost'] that suggests that some factors of the costs included in the estimate should be excluded," APhA continued. "The cost portion of the state's reimbursement to pharmacies is supposed to cover all of those costs associated with procuring the drug product. By allowing pharmacists to retain their earned discounts, the state is doing nothing more than recognizing those additional costs." APhA also pointed out that the Medicare drug program under the recently enacted Catastrophic Health Care Act specifically allows pharmacies to retain discounts by recognizing published AWPs as representative of acquisition costs. "It is inconsistent with congressional directives for HCFA to continue its quest for reduced versions of AWP for Medicaid programs when they will soon be administering a program that specifically requires AWP." HCFA's AWP policy is anti-small business, NARD contended in Sept. 22 letters to the Reagan Administration. NARD commented that HCFA's position on the state Medicaid agency's use of AWP demonstrates an "extraordinary and well documented commitment to anti-small business policy, which has been repeatedly rejected by those who understand the free enterprise system." In a letter to HCFA Administrator Roper, NARD called the agency's position "inexplicable" in light of the reimbursement mechanism contained in the Catastrophic Health Care Act approved by Congress and signed by President Reagan. The independent pharmacy association also sent a Sept. 22 letter to White House Public Liaison Director and Deputy Assistant to the President Rebecca Range requesting assistance "in impressing upon [HCFA] that it would be prudent to cease and desist" in its position. HCFA's efforts to confiscate pharmacists' earned discounts "is tantamount to harassment," NARD contended. HCFA's position is "one of the most blatant anti-small business policies that we have had to confront in recent years."

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