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Executive Summary

CALIFORNIA MEDI-CAL WILL LIMIT Rx DRUG PAYMENTS TO AWP MINUS 5%, effective Oct. 16. The change in the state's reimbursement formula for drug ingredient costs is part of "emergency regulations" intended to save $ 7.3 mil. in state funds annually ($ 15 mil. in state and federal funding combined). Medi-Cal had been considering a reimbursement rate for pharmacists based on AWP minus 12%. The new measure is an outgrowth of the budget crunch in California. Governor Deukmejian had proposed a budget that would slash $ 80 mil. in combined federal Medicaid and state expenditures from the prescription drug component of the Medi-Cal program. Deukmejian supported a bill in the state legislature to authorize a drug manufacturer rebate program; however, that measure was defeated ("The Pink Sheet" Aug. 14, T&G-11). Nonetheless, the state is considering ways to side-step the defeat of the legislation by implementing the rebate program administratively. For example, a Medi-Cal staffer said companies attempting to get a single-source product on the state's formulary may be refused unless they negotiate a price discount for the program. For single-source drugs already on the formulary, the department is planning to ask manufacturers to offer "voluntary" rebates. Reportedly, those letters will be sent out "within the next few months." In the event that Medi-Cal receives little or no response to their requests, the department is considering holding public hearings "shortly thereafter" to delete those single-source drugs from the formulary. California's Department of Health Services holds hearings to discuss formularies three times a year. Representatives of the Pharmaceutical Manufacturers Association met with Medi-Cal officials on Sept. 19 to oppose the rebate plan. The California Pharmacists Association (CPhA), which lobbied heavily to restrict the AWP discount to 5%, says it is planning a series of mettings with top level officials of the California Health and Welfare Agency and the California Department of Health Services within the "next two to three weeks." The meetings will address measures to restructure the Medi-Cal program, particularly in the areas of reimbursement, drug formulary, drug utilization review and claims processing.

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