Average manufacturer price is dead, or is it? Two months after a Federal District Court Judge granted a temporary restraining
order, preventing the Centers for Medicare and Medicaid Services from implementing the new generic drug reimbursement model
for Medicaid, the future of the reimbursement plan remains up in the air. Still, while it is unclear how or when the case
will be resolved, most pharmacy experts agree that pharmacists will continue to see tightening in prescription drug reimbursement.
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The average manufacturer price (AMP) rule, in fact, is just the latest battleground for pharmacists as CMS, pharmacy benefit
managers, and prescription drug plans all push to reduce prescription drug costs. "The critical issue was years ago when pharmacists
gave up being price setters and became price takers," insists David Kreling, Ph.D., of the School of Pharmacy at University
of Wisconsin – Madison. "The legacy going back to the 1960s is that drug reimbursement has been fraught with inaccuracies
from day one. Drug payment is not just the drug costs, but also includes dispensing fees; both of those were in error from
the start."
Unfortunately for many pharmacists, while drug reimbursement formulas are becoming more accurate, dispensing fees are not.
Even as payors push for greater accuracy in drug cost models, there has been no comparable change in drug dispensing. According
to The Cost of Dispensing, a national study conducted by accounting firm Grant Thornton that was commissioned by the Coalition for Community Pharmacy
Action, the national average cost of dispensing medications is $10.50 per prescription, even though the average dispensing
fee paid by government programs such as Medicaid is closer to $4.50. (See sidebar).
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The prospects for average wholesale price (AWP) seem equally unclear. For years AWP—the most pervasive measure currently used
for pharmacy reimbursement—has been under attack from critics who argue that it is subject to manipulation and lacks transparency.
Many pharmacists countered that argument by insisting that PBMs have already squeezed AWP reimbursements and that any further
reductions in reimbursement would drive pharmacies out of business.
In 2005, Congress mandated Medicaid change from AWP to AMP in an effort to reduce the budget deficit and rein in spending
in the healthcare program. In addition, a group representing unions sued First DataBank, one of the primary publishers of
AWP, and the wholesaler McKesson, claiming they willfully manipulated AWP to inflate pharmacy reimbursement. First DataBank
had agreed to settle the case and stop publishing AWP data, but in a surprise move Judge Patti Saris has invalidated the settlement.
According to sources who attended the hearing, the judge indicated that she was unwilling to allow the elimination of AWP
through the settlement. (See "AMP is back from the dead,").
Opponents remain undeterred. "The marketplace is waking up to how rotten AWP is," argued Alex Sugarman-Brozan, director of
the Prescription Access Litigation (PAL) Project, which brought the suit.
Whatever the prospects for AWP, a showdown is looming over the future of pharmacy reimbursement. As government healthcare
programs increasingly dominate pharmacy reimbursement, pharmacists see the fight over Medicaid's AMP rule as essential for
shaping the future of reimbursement. More experts insisted that AMP, in whatever form it eventually takes, will likely become
the new reimbursement model for Medicare and private insurers.
In taking on AMP, pharmacy organizations have been pulling out all the stops: employing public relations, lobbying, and filing
a legal suit to ensure they have a place at the table. "Historically pharmacists have gone after Medicaid because they have
more influence in politics," argued Kreling. The only question is whether that will be enough.
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