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Proposed Cuts to Pharmacy PACE Reimbursement

Status

House Bill 118 passed the Pennsylvania State Senate on July 27, 2017 and currently is awaiting consideration by the Pennsylvania House of Representatives. This bill would cut the PACE professional dispensing fee from $13 to $10.49.

 

 

Background Information

On November 21, 2016, Governor Wolf signed House Bill 946 (now Act 169 of 2016) into law, which included provisions to modernize and rebalance the Programs of All-Inclusive Care for the Elderly (PACE) reimbursement methodology. This new reimbursement formula pays pharmacies using National Average Drug Acquisition Cost (NADAC) – NADAC is more reflective of a pharmacy’s actual drug acquisition cost, but does not include markup. This resulted in a reimbursement cut to pharmacies that was only partially offset by increasing the professional dispensing fee to $13, which comes closer to reflecting the true cost to dispense.

 

In total this rebalancing amounted to a projected $23.6 million cut to pharmacies throughout Pennsylvania. Due to a change in the Federal Upper Limits (FULs) reimbursement benchmark that went into effect in May 2016, pharmacies were losing money on the majority of PACE prescriptions they dispensed. The rebalancing of the ingredient cost benchmark and dispensing fee reimbursement formula allowed pharmacies to “lose less,” as well as support a rebalanced, more transparent reimbursement formula moving forward.

 

On February 7, 2017, Governor Wolf released his 2017-2018 Executive Budget that proposed slashing the PACE professional dispensing fee from $13 down to $4 without changing the ingredient cost benchmark in the reimbursement formula back to what it was prior to the enactment of Act 169 of 2016. The Wolf Administration then pitched these cuts as necessary for its to merge four state agencies to create a new Pennsylvania Department of Health and Human Services.

 

On March 6, 2017, PPA in conjunction with the Pennsylvania Community Pharmacy Coalition sent a memo to members of the Senate and House Appropriations Committees conveying the desire for transparency in the budget process and the need for a fair professional dispensing fee. Click here to view this memo.


Also on March 6, 2017, the Co-Chairs of the bipartisan Pennsylvania Community Pharmacy Caucus sent a letter to Governor Wolf conveying their desire for transparency in the budget process and the need for a fair professional dispensing fee. Click here to view this letter.

 

On March 23, 2017, at a meeting of the Medical Assistance Advisory Committee (MAAC), the Pennsylvania Department of Human Services (DHS) announced the proposal it plans to submit to the Center for Medicaid and Medicare Services (CMS) relating to pharmacy Medicaid reimbursement. This proposal includes adopting a Medicaid professional dispensing fee of $7. Following release of this proposal, DHS and the Wolf Administration announced revised plans to cut the PACE professional dispensing fee from $13 to $7, as opposed to the initially proposed $4.

 

House Bill 118 passed the Pennsylvania State Senate on July 27, 2017 and currently is awaiting consideration by the Pennsylvania House of Representatives. This bill would cut the PACE professional dispensing fee from $13 to $10.49.

 

 

Why We Oppose Cutting the PACE Dispensing Fee

  • The proposal to cut the PACE professional dispensing fee contradicts Act 169 of 2016, signed by Governor Wolf on November 21, 2016, which set the dispensing fee at $13.
  • These are cuts to pharmacists who provide medications to Pennsylvania’s elderly population.
  • Pharmacies have been a strong advocate for and partner in the PACE program since its inception. Keeping pharmacies engaged in the care for Pennsylvania’s elderly population is crucial.
  • When NADAC is used, professional dispensing fees are the only way a pharmacy can cover all of the costs and services (including overhead) of dispensing a prescription.

 

 

Understanding Pharmacy Reimbursement 


 

The change does not result in paying pharmacies more. Rather, it rebalances the formula taking the margin out of the ingredient cost and offsetting it with a true professional dispensing fee. In many cases, the payment to pharmacies is still a decrease, especially if the dispensing fee is set too low.

 

 

Understanding the Terminology

NADAC (National Actual Drug Acquisition Cost): This is the cost the pharmacy pays to purchase medications. The price list is readily available on the CMS website and is updated weekly.

AWP (Average Wholesale Price): This is an estimated compendium benchmark for ingredient cost, including mark up. CMS stipulates that this cannot be used as the primary form of reimbursement in the new system.

CMS (Centers for Medicaid and Medicare Service): This is the federal agency under the Department of Health and Human Services with jurisdiction over Medicare and Medicaid.

WAC (Wholesale Acquisition Cost): This is an estimated compendium benchmark for ingredient cost, including mark up. CMS stipulates that this cannot be used as the primary form of reimbursement in the new system.

 

 

Additional Resources

Gov. Wolf's budget proposal will hurt pharmacies and seniors

By Ed Bechtel in The Morning Call

June 16, 2017

 

House Republican committee leaders oppose DHHS merger
By Carley Mossbrook of Capitolwire
April 17, 2017

 

On April 5, 2017, Representative Tim Hennessey questioned Human Services Secretary Ted Dallas and Aging Secretary Teresa Osborne on the proposed cuts to pharmacy. Click here to view (questioning runs from 17:11 to 23:47).

 

On March 29, 2017, Senator Michele Brooks questioned Human Services Secretary Ted Dallas on the Wolf Administration's proposed cuts to pharmacy. Click here to view (questioning runs from 43:15 to 47:25).

 

Stakeholders remain skeptical of Wolf’s pharmacy 'consolidation' plan
By Carley Mossbrook of Capitolwire
March 27, 2017


Big chuck of proposed HHS merger savings questions by PA's pharmacies
By Carley Mossbrook of Capitolwire
March 21, 2017

 

On March 3, 2017, Representative Seth Grove questioned Human Services Secretary Ted Dallas on the Wolf Administration's proposed cuts to pharmacy. Click here to view (questioning runs from 01:11:30 to 01:16:40).

 

Pharmacy Pricing for Federal Upper Limits (FULs) and National Average Drug Acquisition Cost (NADAC)

Medicaid.gov

 

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