NCPA challenges HHS report on drug acquisition charges – National Community Pharmacists Association, Department of Health and Human Services

NCPA challenges HHS report on drug acquisition charges – National Community Pharmacists Association, Department of Health and Human Services – Brief Article

James Frederick

ALEXANDRIA, Va. — The organization representing independent and small-chain pharmacy owners is expressing “serious concerns” about both the methodology and accuracy of a recent federal study of what community pharmacy retailers pay for brand name drugs.

That report, argues the National Community Pharmacists Association, underestimates the price pharmacies pay for prescription drug inventories and presents a misleading message about pharmacy gross margins. If its recommendations are acted upon, noted the independent pharmacy organization, it could put additional pressure on those margins and threaten the survival of some retailers.

The findings were published in a recent report from the Department of Health and Human Services’ Office of the Inspector General. The OIG analyzed invoices from 216 chain and independent community pharmacies in eight states, including Colorado, Florida, Indiana, Montana, Texas, Washington, West Virginia and Wisconsin. From that data, they estimated that pharmacies’ actual acquisition costs were 21.84 percent below average wholesale prices.

The OIG recommended that the U.S. Center for Medicare and Medicaid Services (for merly the Health Care Financing Administration) encourage the states to review their Medicaid reimbursement policies and “require the states to bring pharmacy reimbursement for brand name drugs more in line with the actual acquisition cost that we identified as being 21.84 percent below AWP.”

That recommendation could have a chilling effect on drug stores’ already anemic level of profit, argued NCPA. In response, the organization directed a letter to HHS inspector general Janet Rehnquist disputing the findings and requesting more information on the study’s methodology.

“We have no evidence that our members have access to discounts of the magnitude re ported in the study,” said NCPA executive vice president Cal Anthony, who is a pharmacy owner. “Having looked at invoices for my own stores, I can assure you our discounts on branded products don’t come close to the numbers in this study.”

What’s more, said the outgoing NCPA official, “We also know that HHS has no legal authority to mandate specific Medicaid reimbursement payments for the respective states.”

Anthony, who last month announced his intention to retire (see story on page 47), asserted that most pharmacy operators are working under “extremely thin, 2 [percent] to 3 percent net profit margins” in their prescription departments. “For more than a decade, community pharmacists have struggled with decreasing reimbursement rates from Medicaid and private insurers,” he said. “We are concerned by the OIG’s suggestion that rates be lowered even more, without consideration for the pharmacist’s cost of doing business.

“Currently, the average discount given Medicaid is more than 10 percent below AWP,” Anthony added. “Further discounts off AWP would imperil the continued viability of many community pharmacies across the country, which have already borne the brunt of Medicaid’s cost-containment strategies.”

COPYRIGHT 2001 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2001 Gale Group