Last summer, the Centers for Medicare and Medicaid Services published a final rule that provides for reimbursing pharmacies for generic drugs dispensed to Medicaid beneficiaries based on average manufacturer price (“AMP”) rather than the average wholesale price. The drug store trade associations, the National Association of Chain Drug Stores and the National Community Pharmacist Association, warned that the rule would have a dire impact on pharmacies and lead to thousands of closures. I expect that the rule also would lead to higher generic drug costs for the FEHB Program and other employer sponsored health plans. The pharmacy trade associations have been working for a legislative fix because the rule is derived from the Deficit Reduction Act of 2005.

On December 14, Judge Royce Lamberth of the U.S. District Court for the District of Columbia preliminarily enjoined CMS from enforcing the rule in the case of National Association of Chain Drug Stores v. HHS Civil Action No. 1:07-cv-02017. The judge entered a written order on December 19. CMS can appeal this order to the D.C. Circuit.

According to the NAPS press release on the preliminary injunction,

“NCPA will use this reprieve to convince Congress of the need for structural improvements in the Medicaid reimbursement system that will not handicap community pharmacies by paying them substantially below their acquisition costs.”With Congress now in adjournment, time has run out this year for
AMP fix legislation endorsed by NCPA: H.R.3140, H.R.3700, and S.1951. NCPA
intends to keep working through the holidays to gain further support for their
enactment when Congress returns in mid-January.

The AMP rule also provided for CMS to post the AMPs on a public web site. Implementation of that provision also has been blocked by the court order.