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MEDICARE TECHNICAL AMENDMENT TO CLARIFY "AWP" AS "LIST AWP"

Executive Summary

MEDICARE TECHNICAL AMENDMENT TO CLARIFY "AWP" AS "LIST AWP" is requested by the American Pharmaceutical Association in Sept. 13 and 27 letters to Congress. "A technical amendment to the Medicare Catastrophic Coverage Act would clarify the requirements for use of what [the Health Care Financing Administration] calls 'list AWP' and what Congress and pharmacy call 'AWP,'" APhA said. APhA was responding to a Sept. 7 proposal by the Health Care Financing Administration for establishing reimbursement rates for outpatient prescription drugs under Medicare ("The Pink Sheet" Sept. 11, p. 10). The law requires HCFA to survey drug prices from several sources to establish payment levels. However, the proposed rule states that HCFA will not use list (published) AWPs "because we believe [using the actual price] is consistent with congressional intent" and "will be more accurate." The letter states that APhA is "deeply concerned about HCFA's bold defiance of congressional intent in its proposed payment regulation." Congress established AWP "because it is a general benchmark used in pharmacy reimbursement to take into account pharmacies' prescription drug costs," the association said. "HCFA's dismissal of AWP as a basis for reimbursement and its proposed interpretation of AWP when combined with six-month updates" is "equivalent" to discounting drug cost payments to pharmacists by "approximately 20% to 25% -- a dramatic difference," the association maintained. The proposal, APhA said, is "inconsistent with the statute and [contradicts] the understanding reached between pharmacy and congressional leaders on providing fair reimbursement programs for pharmacists." Furthermore, APhA maintained, even though the proposal would lower AWP values, it "will likely increase program costs." The strategy will cause pharmacy participation to drop, and "then the electronic claims system will handle too few claims to render needed cost efficiencies," the letter states. "Increased paper claims by beneficiaries will be far more costly and burdensome to process." The association also noted that the Congressional Budget Office used list AWP for estimating program costs. Letters were sent on Sept. 13 to Democratic Sens. Mitchell (Maine), Baucus (Mont.) and Pryor (Ark.) and to Republican Sens. Heinz (Pa.), Durenberger (Minn.), Packwood (Ore.), Chafee (R.I.) and Daschle (S.D.). Similar letters were sent to Reps. Waxman (D-Calif.) and Stark (D-Calif.) on Sept. 27. They were signed by APhA Executive VP John Gans and Government Affairs Director William Hermelin.
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