Pharmacy groups question OIG's AWP report

Thursday, January 31, 2002

ALEXANDRIA, Va. - Two organizations representing community pharmacies claim an OIG report uses flawed methodology to determine the price pharmacies pay for prescription drugs. Moreover, the organizations question whether adjusting Medicare reimbursement would save Medicaid close to $1 billion a year.

The National Association of Chain Drug Stores and the National Community Pharmacists Association (NCPA) claim the OIG puts too much emphasis on the prices pharmacies pay to acquire prescription medication. The organizations say acquisition costs alone should not be used to determine Medicaid reimbursement rates. Other costs, such as securing and maintaining products in inventory, the cost of returned goods and shrinkage, should also have been taken into consideration.

In its August report, the OIG concluded that retail pharmacies purchase branded drugs at a discount rate of average wholesale price (AWP) minus 21.84%. It also contends that adding 11.53% to the discounts provided to Medicaid programs for the 200 most-prescribed drugs would bring the two rates in line and save Medicaid millions.

With a study done for them by the University of Texas as ammunition, however, the two organizations claim the report:

- failed to sample Medicaid pharmacy providers accurately;

- may not have included a representative sample of Medicaid drugs;

- did not correct its estimate for the nearly 16% of all pharmacies that failed to respond to its survey;

- inconsistently categorized branded versus generic; and

- did not consider Medicaid sales when weighting the discounts it reports.

The organizations also claim the OIG overestimated Medicaid savings by assuming all reimbursements are made at the AWP reimbursement rate. HME