DEPARTMENT OF
PUBLIC WELFAREPharmacy Services [35 Pa.B. 4264] By notice published at 35 Pa.B. 3268 (June 4, 2005), the Department of Public Welfare (Department) announced its intent to revise its payment methodology for brand name and generic drugs dispensed on and after July 1, 2005, and invited public comment to the proposed revisions. The purpose of this notice is to respond to the comments received and to advise providers of the changes made to the payment methodology since publication of the previous notice. The Department is also soliciting additional comment to the proposed methodology to determine the State maximum allowable cost (MAC) for multisource drugs dispensed on and after August 22, 2005. These revisions will affect providers enrolled in the Medical Assistance (MA) Program that dispense drugs in the fee-for-service delivery system.
Changes Effective August 10, 2005
Having considered the comments received in response to the notice published at 35 Pa.B. 3268, the Department will change its payment methodology for brand name and generic pharmaceuticals dispensed in the MA fee-for-service delivery system on and after August 10, 2005, as follows:
(1) For brand name drugs. The lower of the following:
(i)(A) The lowest wholesale acquisition cost (WAC) listed for the drug in available Nationally recognized pricing services plus 7%.
(B) If WAC data is not available from the Nationally recognized pricing services, the lowest average wholesale price (AWP) listed for the drug in available Nationally recognized pricing services minus 14%.
(C) If both WAC and AWP cost data are available for the drug, the lower of the two amounts.
(ii) The State MAC as set forth in 55 Pa. Code § 1121.56(d) (relating to drug cost determination).
(2) For generic drugs. The lower of the following:
(i)(A) The lowest WAC listed for the drug in available Nationally recognized pricing services plus 66%.
(B) If WAC data is not available from the Nationally recognized pricing services, the lowest AWP listed for the drug in available Nationally recognized pricing services minus 25%.
(C) If both WAC and AWP cost data are available for the drug, the lower of the two amounts.
(ii) The State maximum allowable cost as set forth in 55 Pa. Code § 1121.56(d).
Changes Proposed to Take Effect on August 22, 2005
The Department proposes to change its methodology for determining the State MAC for multisource pharmaceuticals dispensed in the fee-for-service delivery system on and after August 22, 2005, to the lower of the following:
(1) The upper payment limit established by the Centers for Medicare and Medicaid Services (CMS).
(2) Provided that the generic product is available at the price established by the Department from at least two wholesalers:
(i) If the generic product is available from more than one manufacturer, the base price of 150% of the lowest acquisition cost for the generic product, unless 150% of the lowest acquisition cost is not at least 120% of the second lowest acquisition cost, in which case the base price will be set at 120% of the second lowest acquisition cost.
(ii) If the generic product is available from only one manufacturer, the base price of 120% of the acquisition cost.
For both brand name and generic drugs, the current $4 dispensing fee will not change.
The Nationally recognized pricing services include First Data Bank, Medi-Span and Micromedix. These services provide drug-specific information such as actual AWP and actual WAC pricing to the Department.
The Department has not changed its pharmacy payment rates since 1995. Since then, payment rates both Nationally and within this Commonwealth have continued to fall. The change in payment methodology for both brand name and generic drugs will align the Department's payment methodology with those of other third-party payors, including the Department's contracted managed care organizations.
The WAC is the cost at which a wholesaler purchases drugs from the manufacturer, as opposed to the AWP, which is the price assigned to a drug by its manufacturer. By basing the payment methodology on WAC, when available, rather than AWP, the Department expects that its drug pricing will more accurately reflect actual drug costs.
In a report issued in September 2002, the United States Office of Inspector General concluded that the cost to pharmacies of multisource drugs ranged from AWP minus 44.2% to AWP minus 72.1%. The revised method for determining the State MAC will likewise bring the Department's pricing methodology in line with actual drug costs.
Fiscal Impact
These changes, in total, are estimated to result in savings totaling $57.608 million ($26.492 million in State funds) in the MA Outpatient Program in Fiscal Year (FY) 2005-2006. Savings are estimated to be $54.518 million ($25.134 million in State funds) in FY 2006-2007. The State MAC list for multisource drugs proposed to be effective August 22, 2005, is estimated to save $22.353 million ($10.279 million in State Funds) in the MA Qutpatient Program in FY 2005-2006. Savings are estimated at $21.838 million ($10.068 million in State Funds) in FY 2006-2007.
Public Comment
A copy of this notice is available at the local county assistance office. Interested persons are invited to submit written comments regarding the proposed methodology to determine the State MAC for multisource drugs. Comments should be submitted to the Department of Public Welfare, Office of Medical Assistance Programs, c/o Deputy Secretary's Office, Attention: Regulations Coordinator, Room 515, Health and Welfare Building, Harrisburg, PA 17120, dyearsley@state.pa.us. Comments received by August 5, 2005, will be considered before establishing the final methodology for determining the State MAC for multisource drugs is established.
Persons with a disability who require an auxiliary aid or service may submit comments using the AT&T Relay Service at (800) 654-5984 (TDD users) or (800) 654-5988 (voice users).
ESTELLE B. RICHMAN,
SecretaryFiscal Note: 14-NOT-436. No fiscal impact; (8) recommends adoption. As a result of this change, the General Fund will realize a savings of approximately $26.49 million in 2005-2006 and $25.13 million in 2006-2007.
[Pa.B. Doc. No. 05-1449. Filed for public inspection July 29, 2005, 9:00 a.m.]
