CMS changes to Medicaid Rx drug payment rules hit US pharmacies

The US Centers for Medicare and Medicaid Services (CMS) has announced a "final rule" on a methodology for prescription drug reimbursements to state Medicaid agencies, provoking a furious response from pharmacies. The new arrangements are intended to save states and the federal government about $8.4 billion over the next five years, the CMS explained, and are aimed at "reigning in inflated drug product payments."

Leslie Norwalk, the agency's Acting Administrator, said: "this new payment formula allows Medicaid to pay more appropriately for prescription drugs dispensed to Medicaid beneficiaries." Even with the savings, drug spending by Medicaid programs would be around $140.0 billion over the five-year period, she added.

The main problem identified by the CMS is the use by state authorities of commercial drug pricing guides to set reimbursement levels. Two federal audits published in 2004, respectively by the Government Accountability Office and the Department Health And Human Services' Office of the Inspector General (OIG), documented evidence that prices were artificially inflated, especially for some generic drugs. To make matters worse, pharmacists allegedly had an incentive to dispense the generic drugs with the biggest mark-ups.