A regulation that limits reimbursements for prescription medicine could save states and the federal government $8.4 billion during the next five years.
The regulation allows Medicaid to pay “more appropriately” for prescription drugs dispensed to Medicaid beneficiaries, said Leslie Norwalk, acting administrator of the Centers for Medicare and Medicaid Services.
The change is aimed at reducing drug prices and keeps the Medicaid drug program at a $140 billion budget through 2011.
The change comes as part of the Deficit Reduction Act of 2005, and is a result of studies issued by the Government Accountability Office and the Health and Human Services Office of the Inspector General that show Medicaid payments to pharmacies were much higher than what pharmacies were actually paying for drugs.
States were overpaying for drugs because they were using commercial drug pricing guides as the basis for setting state reimbursement levels, the reports showed. An investigation determined that prices are artificially inflated, especially for generic drugs. Pharmacies, the reports said, made the most profit on drugs with the highest mark-up, creating an incentive to dispense those drugs.
Earlier efforts to stem growth in drug costs have been unsuccessful, Norwalk said. The federal upper limits, which capped federal matching payments to states for generic drugs, were based on artificially inflated prices. For example, one study found that of 25 drugs reviewed, 23 had prices more than double the average pharmacy cost.
“Those prices were so high that most states set their own upper limits on allowable drug costs that generally were far less than the federal FUL (federal upper limits),” Norwalk said.
Many drug companies also reported prices to the compendia — which the government based its price limits — that bore little relationship to the drug’s cost. Until the 2005 law, actual drug costs were considered proprietary information that was kept secret. CMS was prohibited by law from disclosing the average manufacturers’ price.
The law also made an important change to health care purchasing by introducing transparency in Medicaid prescription drug pricing and requires — for the first time — that average manufacturers prices be available on the Internet. States will now be able to use actual pricing information as the basis for setting drug reimbursement rates.
Pharmaceutical companies also are required to report their pricing monthly, as well as quarterly.
The rule requires states to collect information from doctors about drugs they administer in their offices.
According to federal law, manufacturers are required to give the state a rebate for all covered outpatient drugs given to Medicaid patients.
Pharmacy revenue for prescription drugs will decline by less than 1 percent, according to industry data.
The regulation also provides for a new definition of “dispensing fees,” which cover a pharmacy’s costs of dispensing the drug, including overhead. In order to adjust dispensing fees, state programs must submit a state plan amendment for federal approval. Dispensing fees receive a full federal match.
The regulation will take effect Oct. 1 and can be viewed at: www.cms.hhs.gov/MedicaidGenInfo/Downloads/CMS2238FC.pdf.
The Joint Commission has changed its annual National Patient Safety Goals, including requirements that reduce risks involved with anticoagulant therapy and responses to unexpected deterioration of a patient’s condition.
The 2008 goals and requirements were approved by the Board of Commissioners and apply to nearly 15,000 Joint Commission accredited and certified health care organizations and programs.
The anticoagulant therapy requirement addresses a widely-acknowledged patient safety problem and becomes a key element of the goal: Improve the safety of using these medications.
It is applicable to hospitals, critical access hospitals, ambulatory care and office-based surgery settings, as well as home care and long-term care organizations. The goal and requirement concerning patients whose condition is deteriorating will require hospitals to select a suitable method to allow caregivers to obtain assistance from specially-trained doctors. Full implementation is scheduled for January 2009.
In addition, an existing requirement to assure timely reporting of critical test results has been extended to long-term care programs.
The group also allows organizations to use the World Health Organization guidelines for washing hands as an alternative to the guidelines set up by the Centers for Disease Control and Prevention.
One requirement — to limit and standardize drug concentrations — has been retired as a goal for patient safety, but organizations will still be evaluated on the measure as part of medication management requirements.
“The 2008 National Patient Safety Goals seek to focus the efforts of health care organizations on the priority areas where the opportunities for improving patient safety are greatest,” said Dr. Dennis S. O’Leary, president of The Joint Commission. “Consistently putting these requirements into action will benefit millions of patients.”
The text of the 2008 Goals and Requirements is posted on the Joint Commission Web site, www.jointcommission.org.
Amy Gillentine covers health care for the Colorado Springs Business Journal.