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STATE MEDICAID PROGRAMS GET REPRIEVE TO JULY 31 TO SEND DRUG FIRMS FIRST USE REPORTS FOR REBATES; TARDY MANUFACTURER DATA, DEFINITIONAL PROBLEMS CITED

Executive Summary

State Medicaid programs will have until July 31 to send manufacturers the first round of drug utilization data needed to calculate rebates, Health Care Financing Administration Medicaid Bureau staffer Richard Friedman told a June 4 session of the State Medicaid Directors' Conference in Washington, D.C. Under the drug price rebate law, states were required to send the reports by May 31; manufacturers had 30 days following receipt to remit rebates to the states. Friedman, director of the bureau's Division of Payment Systems, explained that the decision resulted from two factors: a number of manufacturers had not sent required baseline data to HCFA and definitional problems, primarily confusion over what constitutes a "unit" of a product, have called into question the uniformity and reliability of the data that has been submitted. Data integrity has been an ongoing concern during the rebate program's implementation, with most of the attention focused on whether states and pharmacies are using the correct national drug code (NDC) numbers and whether additional data should be provided, such as zip codes ("The Pink Sheet" Feb. 18, p. 3). To date, 341 manufacturers have signed rebate agreements, including an initial group of 247. Recapping the events that led up to HCFA's decision to postpone the May 31 requirement, Friedman noted that manufacturers are required to "send us baseline data, [including] all of their national drug codes, and also [to] send us quarterly information." The baseline data was due by April 1, and the "additional data for the January-March quarter [was due] by April 30." HCFA had intended to relay the data to states by May 15 for use in preparing their reports. As of May 15, 10 of those initial 247 companies "had not submitted the basic baseline data, and 75 of the 247 hadn't submitted quarterly data," Friedman reported. "Of the data we did have, there were major definitional problems." The problems, he added, included "definitions of what constitutes units [and] units per package size. These were terms that we were defining differently than manufacturers have, and it began to get a little bit scrambled." Under the program, rebates are to be calculated based on the lowest identifiable unit of a product. Friedman said HCFA was "faced with the dilemma" of holding states to the legal deadline versus starting the rebate calculations with faulty data. The agency decided to "at least hold the states harmless for sending manufacturers by the end of May the data. Because we felt, in all honesty, that if they did send it..... they would spend, and the manufacturers would spend, time and money that neither of them had [in order to unscramble] the mess that we have." With HCFA Administrator Gail Wilensky's approval, Friedman said, the agency advised states that they would have a two-month extension. While the decision bends the statutory requirement, congressional committees are not expected to object to the postponement given that the program is just getting under way. "Our perspective was to be as reasonable as possible," Friedman added. Pennsylvania Medicaid official Gerald Radke, who chairs HCFA's pharmacy technical advisory group, said the discussions of product unit size "would put Jesuits to shame in terms of [counting] angels on the head of a pin. Manufacturers define units one way, pharmacists define it another way, states..... another way. So you have to be real careful [that] to you a pill is not a unit and to someone else that pill is 250 of some other type of unit. And that may be the most ticklish problem that we all have in trying to figure out how to implement this." He added that Pennsylvania has sent out its reports due to concern about the potential legal vulnerabilities of not adhering strictly to the May 31 statutory requirement. HCFA also is nearing completion of its review of state rebate agreements that existed prior to enactment of the federal law, HCFA Office of Medicaid Policy Director William Hickman said. The federal measure permits states to complete the initial term of those agreements providing they yield aggregate savings of at least 10%.
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