The most significant Medicaid requirements applicable to pharmacy practice are those found in the OBRA ‘90 provisions. However, there are other Medicaid provisions that are directly relevant to pharmacy practice because they relate to reimbursement for the products pharmacists provide to patients. Title XIX of the SSA of 1935, Medicaid (42 U.S.C. § 1396 et seq.), provides for the healthcare costs of certain categories of indigents, including:
The blind
The disabled
The aged
Members of families with dependent children
Eligibility is determined by an individual's income and assets. Some patients (called dual-eligible) are eligible for both Medicare and Medicaid. Prescription drug benefits for dual-eligible patients are covered by Medicare Part D rather than Medicaid.
Although administered by each state, the Medicaid program is subject to federal approval and regulation under the authority of CMS. The state's program is jointly funded, with the federal government reimbursing the state government for a certain percentage of its Medicaid expenditures. Medicaid covers all or part of several services, including:
Inpatient and outpatient hospitalization
Laboratory and X-ray studies
Care in a SNF
Physician care
Home healthcare
Dental care
Nursing care
Optometry
Outpatient prescription drugs
Overview of Important Developments in Medicaid and Prescription Drug Reimbursement
Medicaid provides healthcare costs for certain categories of indigent patients and is administered by the state, jointly funded by the federal government and the state, with each state program subject to federal approval and federal regulation.
State Medicaid programs reimburse pharmacies for drugs based on ingredient costs and a professional dispensing fee, and the final price paid is determined by a complex set of federal and state policies.
The federal government established the "MAC" program for drugs in 1975 out of concern that state Medicaid agencies were reimbursing pharmacies too much.
The FUL program replaced the MAC program in 1987. FUL drugs are multiple-source drugs for which CMS determines a reimbursement amount.
The calculation for Medicaid reimbursement to a pharmacy for a dispensed drug product on the FUL list is the FUL price of the drug plus a dispensing fee, as determined by each state.
Prior to the current law, the FUL price of a drug was calculated as 150% of the published price (AWP) for the least-costly therapeutic equivalent and later at 250% of AMP.
Current law provides that the FUL price of a drug is determined as no less than 175% of the weighted average of the most recently reported AMPs for therapeutically equivalent drug products available for purchase by "retail community pharmacy" on a nationwide basis. CMS regulations provide an exception, allowing for the use of a higher multiplier when the FUL calculation amounts to less than the average retail community pharmacies' acquisition cost.
The definition of "retail community pharmacy" excludes mail order, nursing home, LTCF, hospital, clinic, not-for-profit and government pharmacies, and PBMs (42 C.F.R. § 447.504(a)).
AMP is defined as the average price paid to the manufacturer by wholesalers for drugs distributed to "retail community pharmacy" and that "retail community pharmacy" pays for drugs directly from the manufacturer.
The FUL price must be based on quantities of 100 tablets or capsules or on quantities commonly provided by pharmacists. The agency must specify the compendia source for its price basis for each drug, and an FUL drug must be therapeutically equivalent and available from three different suppliers.
If a drug is not on the FUL list or the prescriber has designated "brand necessary" the pharmacy is reimbursed the lower of (1) AAC plus a dispensing fee established by the agency or (2) providers' usual and customary charges to the general public (42 C.F.R. § 447.512(b)).
Prior to the formula provided earlier, pharmacies were reimbursed based on the EAC of the drug rather than the AAC. States determined EAC based on AWP; however, AWP has been determined to be a flawed estimate of what a pharmacy actually pays for a drug product.
Provider organizations in various states have sued to prevent cuts in Medicaid reimbursement.
Courts have ruled against pharmacy plaintiffs suing over inadequate Medicaid dispensing fees, finding that the state has no duty to conduct dispensing fee studies nor reimburse on the basis of the studies if they were conducted.
Medicaid prescriptions must be written on tamper-resistant prescription pads.
Pharmacist Bob owns an independent community pharmacy that dispenses Medicaid prescriptions. Bob received a prescription for a brand-name drug for which there are generic drug products available. The drug is listed on the FUL list. Because of a question about the directions written on the prescription, Bob called the prescriber. The prescriber clarified the directions and then told Bob to dispense the brand-name drug prescribed and not a generic, although nothing had been indicated on the prescription.
If Bob were to dispense the generic, how would Medicaid reimburse him?
If Bob were to dispense the brand-name drug, how would Medicaid reimburse him, assuming he met the requirements for dispensing the brand name?
If Bob dispenses the brand-name drug, has he met the legal requirements for doing so?