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HCFA REVIEW OF MEDICAID REBATE DISPUTES IDENTIFIES BAR CODING AMONG LONG-TERM STRATEGIES; STANDARD UNITS OF MEASURE, "TRIAGING" DISPUTES IS CONSIDERED

Executive Summary

HCFA is looking at drug product bar coding as one long-term strategy to reducing disputes between states and manufacturers over Medicaid drug rebate utilization data, Health Care Financing Administration Office of Medicaid Policy Director William Hickman indicated at a Feb. 28 conference sponsored by the National Health Lawyers Association and the Food & Drug Law Institute. One strategy "that we're talking about," Hickman reported, "is various bar coding at the pharmacy level." He pointed out that HCFA is "not moving forward with it yet." There are "some cost implications as to the machinery and equipment you have to read the bar code, and in some cases manufacturers don't have the NDCs [National Drug Codes] contained in the bar code," Hickman added, but "it seems like the direction in the future is more toward bar coding." Pharmacy education is HCFA's near-term approach to the "whole issue of improving the accuracy of the pharmacy coding" of drug utilization, Hickman said. "We believe we have the support of pharmacy associations now in sending out educational material to the pharmacies stressing the importance of accurate coding; some states have already done that," Hickman said. He commented that probably "there would be a lot fewer disputes" if manufacturers "were absolutely confident that the pharmacies were putting the right labeler code down in the first place." Under the Medicaid rebate program, rebates are billed to the holder of the NDC contained on the product's label. Other strategies under consideration include standardizing the units of product measurement used for computing rebates, "triaging" different types of disputes, setting a deadline by which disagreements between states and manufacturers are either resolved or forwarded to another level of review, and giving states some more authority to settle disputes on their own without the fear of losing their federal Medicaid dollars if later overruled by federal officials. The Medicaid program generally requires that rebates be calculated based on the lowest definable unit of a product. Hickman commented that HCFA "decided we'd let the manufacturers tell us what the unit is." However, the manufacturer-defined unit "is not necessarily the unit that the "Red Book," the "Orange Book," the pharmacies or other people use, so you get into all sorts of conversion factors as a result." Hickman also said that manufacturers of competing versions of a drug sometimes have used different units. On the triaging issue, Hickman said there are disagreements that are "obvious" and more easily resolved, such as reports of NDC codes that belong to another manufacturer. It "would ease the logjam if states and manufacturers first worked out those obvious ones and got them out of the way," then they could turn to less "obvious" questions such as disputes over utilization figures. HCFA also may describe the responsibilities of states and manufacturers to provide data once a dispute arises. Hickman noted that some manufacturers are interested in obtaining pharmacy-level drug utilization data states but the data frequently are considered confidential. HCFA is looking at some way of drawing upon that data if marketers also are "willing to share their data" to allow the state to "do a comparative run and come back with some differential analysis that might pinpoint where the problem is." HCFA is nearing completion of its Federal Register regulations to govern the Medicaid rebate program but it is uncertain how they would be affected by the 90-day regulatory moratorium the President announced in January. Hickman added that if HCFA decides to draft a new rebate contract, it will not be before Oct. 1, because the agency wants to resolve other issues first. States and manufacturers are operating under the original rebate contract signed before March 1, 1991.
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