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Proposed Cuts to Pharmacy PACE Reimbursement
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Summary

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 in compliance with the Center for Medicaid and Medicare Services (CMS) Final Outpatient Drug Rule. This new reimbursement formula pays pharmacy using National Average Drug Acquisition Cost (NADAC) and only partially offsets that cut in product through an increased professional dispensing fee, from $4 to $13, that comes closer to reflecting the true cost to dispense.

 

In total this rebalancing amounted to a $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.

 

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 CMS relating to pharmacy Medicaid reimbursement. This proposal includes adopting a 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.

 

Click here to view the DHS presentation from the MAAC meeting held on March 23, 2017.

 

Click here to view the Pharmacy Cost Dispensing Study that DHS released on March 23, 2017.

 

This issue is closely tied to the proposed cuts to pharmacy Medicaid reimbursement. This is because Governor Wolf has requested uniformity in pharmaceutical pricing and proposed merging several state agencies to create a new Pennsylvania Department of Health and Human Services - these agencies include DHS, the Pennsylvania Department of Health, the Pennsylvania Department of Aging, and the Pennsylvania Department of Drug & Alcohol Programs. Click here to learn more about reformulation of Medicaid reimbursement and PPA's opposition to the current DHS proposal.

 

 

Visual Representation of Rebalancing the Payment System




Why PPA Opposes Governor Wolf's Proposed Cuts

The proposed cut to the PACE professional dispensing fee (whether the initial 70% cut to $4 or the revised 46% cut to $7) contradicts Governor Wolf's signing of House Bill 946 on November 21, 2016 that set the dispensing fee at $13.

The Governor's proposal cuts an additional $45 million from pharmacy, totaling $68.6 million for the 2017-2018. The $45 million in cuts to pharmacy account for half of the $90 million in savings the Wolf Administration is booking under the merger of the four healthcare related agencies.

According to the Budget office, the rationale for the change is to equalize what is being paid as a dispensing fee by Medicaid. This is based on inaccurate information and a disregard for compliance with a federal law. Medicaid is currently paying pharmacy based upon a totally different ingredient cost benchmark formula than PACE.


Status

On March 6, 2017, PPA in conjunction with the Pennsylvania Association of Chain Drug Stores (PACDS), the National Association of Chain Drug Stores (NACDS), the National Community Pharmacists Association (NCPA), Independent Pharmacy Buying Group (IPBG), Keystone Pharmacy Purchasing Alliance, and Value Drug Company sent a memo to members of the Senate and House Appropriations Committees conveying the desire for transparency in this 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 this process and the need for a fair professional dispensing fee. Click here to view this letter.

 

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

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

 

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

 

On Monday, April 24, 2017, the Wolf Administration released draft enabling legislation for its proposal to merge the Departments of Aging, Drug & Alcohol Programs, Health, and Human Services. Click here to view this draft enabling legislation.

 

 

Understanding the Terminology

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

AWP (Average Wholesale Price): This is the estimated compendium benchmark for ingredient cost, including mark up. Medicaid cannot use AWP after April 1, 2017.

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

FULs (Federal Upper Limits): This applies to ingredient cost on generic drugs, dramatically cut by Feds to conform with cost-based reimbursement.

WAC (Wholesale Acquisition Cost): This is the estimated compendium benchmark for ingredient cost, including mark up. Medicaid cannot use WAC after April 1, 2017.

 

Issue Brief

Click here for an issue brief on the proposed cuts to pharmacy PACE reimbursement.
 

 

Resources

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

 

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

 

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

 

Facts about the Governor’s PACE and Medicaid Pharmacy Reimbursement Cut Proposals


Pharmacy Reimbursement Flyer prepared for members of the Pennsylvania Community Pharmacy Caucus

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