Healthcare Distribution Management Association (HDMA) issued the following statement on the Centers for Medicare & Medicaid Services’ (CMS) Final Rule to implement the Deficit Reduction Act of 2005’s changes to the calculation of Average Manufacturer Price (AMP).

Although distributors are not directly reimbursed by Medicaid, HDMA continues to believe revisions to the AMP final rule are needed to ensure that Medicaid reimbursement is fair and accurate. Without changes, HDMA is concerned that payments under AMP may financially harm many community retail pharmacies, reduce Medicaid beneficiaries’ access to necessary healthcare products and discourage appropriate utilization of generic medicines.

HDMA commends the Centers for Medicare and Medicaid Services (CMS) for making several important changes to the final rule on AMP. In particular, we are pleased that the final rule expressly excludes bona fide service fees from the AMP calculation, and clarifies that cash discounts do not include customary prompt pay discounts paid by manufacturers to distributors. Removing these fees and discounts from the AMP calculation will help ensure that manufacturer payments for services are not inappropriately deducted from retail pharmacy reimbursement.

HDMA also commends the agency for adopting a 12-month rolling average methodology for AMP calculation. A rolling average will have the net effect of “smoothing” rapidly-fluctuating generic drug prices, and will more accurately reflect the average prices paid by retail community pharmacies.

However, HDMA remains concerned that the inclusion of mail order sales in the final AMP calculation will result in lowered reimbursement to pharmacies, as manufacturer mail order discounts are not available to community retail pharmacies. Community retail pharmacies are often the only healthcare provider in urban and rural areas, and they must be fairly reimbursed in order to continue providing medications to Medicaid beneficiaries.

HDMA also is concerned that setting Federal Upper Limits (FULs) at 250% of the lowest AMP, rather than using a weighted average formula, could cut generic prescription reimbursement rates to less than it costs retail pharmacies to acquire the medicines. Given the Federal government’s ongoing efforts to reduce healthcare costs and encourage utilization of generic medications, when appropriate, reimbursements for these medications must be sufficient to encourage their dispensing.

In the coming months, HDMA and our members will continue to work with pharmacies, members of Congress, CMS and others to revise the AMP calculation so that community retail pharmacies are able to continue providing healthcare products and services to local Medicaid beneficiaries.