Medicaid Outpatient Prescription Drugs
Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisition Costs
Gao ID: GAO-10-118R November 30, 2009
Medicaid--the joint federal-state program that finances medical services for certain low-income adults and children--spent $15.0 billion on outpatient prescription drugs in fiscal year 2007. Instead of directly purchasing drugs, state Medicaid programs reimburse retail pharmacies for dispensing them to Medicaid beneficiaries. The federal government provides matching funds to states to help cover the costs of their Medicaid programs, and states must pay the remaining costs to qualify for these federal funds. For certain outpatient prescription drugs, state Medicaid programs may only receive federal matching funds for reimbursements up to a maximum amount known as a federal upper limit (FUL). Designed to control drug spending, FULs are currently calculated as 150 percent of a drug's lowest published price in three national drug pricing compendia. State Medicaid programs can determine reimbursements to retail pharmacies for each drug, but the federal government will only provide matching funds to the extent that reimbursements for all drugs subject to FULs do not exceed established FULs in the aggregate. A 2005 report by the Department of Health and Human Services' (HHS) Office of Inspector General (OIG) found that FULs were ineffective at controlling outpatient Medicaid prescription drug spending. The Deficit Reduction Act of 2005 (DRA) included provisions--the implementation of which has been delayed by judicial and legislative action--that would change the methodology for calculating FULs. Under the DRA, FULs would be calculated as 250 percent of the average manufacturer price (AMP) for a drug's least costly therapeutically equivalent version. In 2006, the Congressional Budget Office estimated that the implementation of AMP-based FULs would reduce total Medicaid spending for prescription drugs by $11.8 billion from 2007 through 2015. However, retail pharmacies have raised concerns that AMP-based FULs would not be sufficient to cover their costs of acquiring drugs dispensed to Medicaid beneficiaries. Two retail pharmacy industry groups, the National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA), have claimed that AMP-based FULs would make some retail pharmacies unprofitable and thus limit certain Medicaid beneficiaries' access to retail pharmacies. A 2006 GAO report and a 2007 report by the HHS OIG both found that AMP-based FULs would have been lower than average pharmacy acquisition costs, on a drug-by-drug basis, for most drugs included in the respective samples. To implement the DRA provisions pertaining to prescription drugs in Medicaid, CMS published a final rule in July 2007. This rule includes provisions regarding the calculation of AMP-based FULs that might also affect how they compare to pharmacy acquisition costs. For example, FULs apply only to certain outpatient prescription drugs--known as multiple-source drugs--and the rule changed the definition of multiple-source drugs. Additionally, to minimize the effect of outliers, the final rule included a provision which would use the second-lowest AMP for a multiple-source drug to set the FUL if the lowest AMP is less than 40 percent of the second-lowest AMP. The final rule requires drug manufacturers to report AMP data on a monthly basis, and drug manufacturers and state Medicaid programs were expected to begin complying with the provisions of the final rule by October 1, 2007.
If AMP-based FULs had been in place in the second quarter of 2008, they would have been lower than average retail pharmacy acquisition costs, in general, for most of the drugs in our sample and in the national aggregate. The median AMP-based FULs for the second quarter of 2008 would have been lower than average retail pharmacy acquisition costs for 54 of the 83 drugs in our sample; 44 drugs had FULs that would have been at least 25 percent below acquisition costs. In the aggregate, the FULs would have been 17 percent lower than acquisition costs, though the difference varied significantly by state, from 57 percent lower to 49 percent higher. However, 64 drugs had at least one therapeutically equivalent version with acquisition costs below the FUL, indicating that pharmacies may be able to substitute lower-priced therapeutic equivalents to bring their costs below the FUL. AMP-based FULs also varied significantly throughout 2008 for 38 drugs, in some cases exceeding the average retail pharmacy acquisition cost one month and falling below it in another month. While partly due to monthly increases or decreases in AMPs, variation also occurred because manufacturers did not report AMP data each month for 11 percent of the therapeutically equivalent versions of the drugs in our sample. If a manufacturer reports the AMP for the lowest-priced therapeutically equivalent version of a drug one month but does not report it the next month, the FUL may change. In its written comments on a draft of this report, CMS disagreed with our finding that if AMP-based FULs had been in place in the second quarter of 2008, they would have been lower than average retail pharmacy acquisition costs for most of the 83 drugs in our sample and in the national aggregate. In particular, CMS expressed concerns about our data source used to estimate average retail pharmacy acquisition costs, including that it does not take into account discounts and rebates that drug manufacturers may provide to retail pharmacies. CMS also expressed concerns about our methodology and inconsistencies between our finding and the findings of an HHS-OIG report, which the OIG shared with us because it has not been publicly issued as of November 2009. However, as we indicate in this report, data on discounts and rebates pharmacies receive are not readily available. We used the most complete, accurate, and verifiable data sources available at the time of our analysis to estimate average retail pharmacy acquisition costs. We believe that these data are sufficiently accurate to achieve the objective of our work. Furthermore, our methodology is sound and any inconsistencies between our finding and the findings of the HHS-OIG report, which was based on data from the fourth quarter of 2007, are largely due to significant fluctuations in drug prices over time.
GAO-10-118R, Medicaid Outpatient Prescription Drugs: Second Quarter 2008 Federal Upper Limits for Reimbursement Compared with Average Retail Pharmacy Acquisition Costs
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GAO-10-118R:
United States Government Accountability Office:
Washington, DC 20548:
November 30, 2009:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on Finance:
United States Senate:
Subject: Medicaid Outpatient Prescription Drugs: Second Quarter 2008
Federal Upper Limits for Reimbursement Compared with Average Retail
Pharmacy Acquisition Costs:
Dear Senator Grassley:
Medicaid--the joint federal-state program[Footnote 1] that finances
medical services for certain low-income adults and children--spent
$15.0 billion on outpatient prescription drugs in fiscal year 2007.
[Footnote 2] Instead of directly purchasing drugs, state Medicaid
programs reimburse retail pharmacies for dispensing them to Medicaid
beneficiaries.[Footnote 3] The federal government provides matching
funds to states to help cover the costs of their Medicaid programs, and
states must pay the remaining costs to qualify for these federal funds.
For certain outpatient prescription drugs, state Medicaid programs may
only receive federal matching funds for reimbursements up to a maximum
amount known as a federal upper limit (FUL).[Footnote 4] Designed to
control drug spending, FULs are currently calculated as 150 percent of
a drug's lowest published price in three national drug pricing
compendia.[Footnote 5] State Medicaid programs can determine
reimbursements to retail pharmacies for each drug,[Footnote 6] but the
federal government will only provide matching funds to the extent that
reimbursements for all drugs subject to FULs do not exceed established
FULs in the aggregate.[Footnote 7]
A 2005 report by the Department of Health and Human Services' (HHS)
Office of Inspector General (OIG) found that FULs were ineffective at
controlling outpatient Medicaid prescription drug spending. The Deficit
Reduction Act of 2005 (DRA) included provisions--the implementation of
which has been delayed by judicial and legislative action--that would
change the methodology for calculating FULs.[Footnote 8] Under the DRA,
FULs would be calculated as 250 percent of the average manufacturer
price (AMP) for a drug's least costly therapeutically equivalent
version.[Footnote 9] In 2006, the Congressional Budget Office estimated
that the implementation of AMP-based FULs would reduce total Medicaid
spending for prescription drugs by $11.8 billion from 2007 through
2015.
However, retail pharmacies have raised concerns that AMP-based FULs
would not be sufficient to cover their costs of acquiring drugs
dispensed to Medicaid beneficiaries.[Footnote 10] Two retail pharmacy
industry groups, the National Association of Chain Drug Stores (NACDS)
and the National Community Pharmacists Association (NCPA), have claimed
that AMP-based FULs would make some retail pharmacies unprofitable and
thus limit certain Medicaid beneficiaries' access to retail pharmacies.
A 2006 GAO report and a 2007 report by the HHS OIG both found that AMP-
based FULs would have been lower than average pharmacy acquisition
costs, on a drug-by-drug basis, for most drugs included in the
respective samples.[Footnote 11]
To implement the DRA provisions pertaining to prescription drugs in
Medicaid, CMS published a final rule in July 2007.[Footnote 12] This
rule includes provisions regarding the calculation of AMP-based FULs
that might also affect how they compare to pharmacy acquisition costs.
For example, FULs apply only to certain outpatient prescription drugs--
known as multiple-source drugs--and the rule changed the definition of
multiple-source drugs.[Footnote 13] Additionally, to minimize the
effect of outliers, the final rule included a provision which would use
the second-lowest AMP for a multiple-source drug to set the FUL if the
lowest AMP is less than 40 percent of the second-lowest AMP.[Footnote
14] The final rule requires drug manufacturers to report AMP data on a
monthly basis, and drug manufacturers and state Medicaid programs were
expected to begin complying with the provisions of the final rule by
October 1, 2007.[Footnote 15]
Although the AMP reporting requirements for pharmaceutical
manufacturers have gone into effect, AMP-based FULs have not been
implemented. In December 2007, as a result of litigation initiated by
NACDS and NCPA, the U.S. District Court for the District of Columbia
issued a preliminary injunction which prohibits CMS from implementing
the final rule to the extent that it would affect Medicaid
reimbursement rates for retail pharmacies and from disclosing AMP data
reported by drug manufacturers, except under limited circumstances. As
of October 1, 2009, that injunction remained in effect. Additionally,
Congress passed legislation--the Medicare Improvements for Patients and
Providers Act of 2008 (MIPPA)--that prohibited CMS from taking any
action to implement the AMP-based FULs or publicly disclose AMP data
before October 1, 2009.[Footnote 16]
To assist congressional consideration of this matter in light of the
concerns that have been expressed by retail pharmacies; changes in the
calculation of AMP-based FULs;[Footnote 17] and the October 1, 2009,
expiration of the MIPPA provision delaying implementation of the AMP-
based FUL, you requested that we reexamine the relationship between the
AMP-based FULs that would be required under the DRA and pharmacies'
average acquisition costs. This report examines the relationship
between these AMP-based FULs and average retail pharmacy acquisition
costs for selected drugs and provides additional information on how
these FULs would affect retail pharmacies.
To compare AMP-based FULs with average retail pharmacy acquisition
costs, we acquired from CMS a list of drugs that would have been
subject to AMP-based FULs for the second quarter of 2008[Footnote 18]
but for the judicial and legislative action discussed above.[Footnote
19] We then used Medicaid utilization data from the second quarter of
2008 to identify drugs with the highest Medicaid utilization and drugs
with the highest Medicaid expenditures on a national level.[Footnote
20] Our resulting sample contained 83 multiple-source outpatient
prescription drugs: 32 drugs with the highest Medicaid utilization, 34
drugs with the highest Medicaid expenditures, and 17 drugs that
appeared in both categories. Our sample of 83 drugs represented 64
percent of total Medicaid utilization and 52 percent of total Medicaid
expenditures for drugs that would have been subject to AMP-based FULs
in the second quarter of 2008. See enclosure I for a complete list of
the 83 drugs in our sample and each drug's classification--high
utilization, high expenditure, or both--in the second quarter of 2008.
For each of the 83 drugs in our sample, for April, May, and June of
2008, we obtained monthly AMP values for every therapeutically
equivalent version as well as monthly AMP-based FUL data from CMS. We
then used the monthly AMP-based FULs from April, May, and June 2008 to
calculate the median AMP-based FULs for the second quarter of 2008.
[Footnote 21] We also obtained national average retail pharmacy
acquisition cost data for the second quarter of 2008 for all
therapeutically equivalent versions of the drugs in our sample from IMS
Health, a contractor. On a monthly basis, IMS Health collects data on
drugs purchased by retail pharmacies from about 100 drug manufacturers
and about 500 distribution centers. These manufacturers and
distribution centers provide data on the number of units sold, and a
portion of them provide data on actual retail pharmacy acquisition
costs. For those manufacturers and distribution centers that only
provide data on the number of units sold, IMS Health estimates retail
pharmacy acquisition costs based on the actual acquisition cost data it
was able to obtain from others. Once IMS Health determines average
retail pharmacy acquisition costs from data it collects, it projects
these data to represent national average retail pharmacy acquisition
costs using a model that is reviewed monthly.[Footnote 22] In addition,
IMS Health conducts detailed data reliability assessments, which
include comparing monthly data from drug manufacturers and distribution
centers to data from the prior month and the prior year in order to
ensure consistency and comparing reported pricing data against
published prices. The national average retail pharmacy acquisition cost
data that we obtained from IMS Health do not account for rebates and
discounts that pharmacies may receive from wholesalers or
manufacturers, if they are not reflected in invoice prices.[Footnote
23]
To examine the relationship between AMP-based FULs and average retail
pharmacy acquisition costs by individual drug, we compared the
quarterly median AMP-based FULs we calculated for the second quarter of
2008 with the average retail pharmacy acquisition costs, weighted by
utilization across all therapeutically equivalent versions of each
drug, from the same period for each of the 83 drugs in our sample. We
also examined the relationship between AMP-based FULs and average
pharmacy acquisition costs in the aggregate by comparing the AMP-based
FULs with the average pharmacy acquisition costs for our entire sample
of drugs weighted by utilization. Because our sample of 83 drugs does
not include all drugs that would have been subject to AMP-based FULs in
the second quarter of 2008, our aggregate results cannot be generalized
beyond our sample. Because the utilization of each drug in our sample
differs from state to state, we performed this analysis at both the
national and state levels using state utilization data and national
average pharmacy acquisition costs. Further, we compared the AMP-based
FULs with the average pharmacy acquisition costs for each of the
therapeutically equivalent versions of all 83 drugs in our sample. This
analysis allowed us to estimate the extent to which pharmacies may be
able to purchase therapeutically equivalent versions of each drug at
costs below the AMP-based FUL. Specifically, we determined the
percentage of Medicaid utilization represented by therapeutically
equivalent versions with pharmacy acquisition costs that are above the
AMP-based FULs, as well as the percentage of Medicaid utilization
represented by therapeutically equivalent versions with acquisition
costs that are below the AMP-based FULs. To assess the extent to which
AMP-based FULs vary over time, we obtained AMP data from CMS for
January 2008 through December 2008 and examined the variation in AMP-
based FULs for the drugs in our sample across those months. Based on
the results of this analysis, we interviewed CMS officials about the
factors that led to the month-to-month variation in the FULs and how
this variation may affect state Medicaid programs.
We discussed our data sources with knowledgeable officials from CMS and
IMS Health. We also performed data reliability checks to test the
internal consistency and reliability of the data, including manually
and electronically checking the data for missing values and obvious
errors, interviewing CMS officials about concerns we uncovered about
AMP data, and reviewing steps that CMS uses to ensure that AMP data are
complete and accurate. After taking these steps, we determined that the
data were sufficiently reliable for our purposes. We conducted this
performance audit from June 2009 through October 2009, in accordance
with generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Results in Brief:
If AMP-based FULs had been in place in the second quarter of 2008, they
would have been lower than average retail pharmacy acquisition costs,
in general, for most of the drugs in our sample and in the national
aggregate.[Footnote 24] The median AMP-based FULs for the second
quarter of 2008 would have been lower than average retail pharmacy
acquisition costs for 54 of the 83 drugs in our sample; 44 drugs had
FULs that would have been at least 25 percent below acquisition costs.
In the aggregate, the FULs would have been 17 percent lower than
acquisition costs, though the difference varied significantly by state,
from 57 percent lower to 49 percent higher. However, 64 drugs had at
least one therapeutically equivalent version with acquisition costs
below the FUL, indicating that pharmacies may be able to substitute
lower-priced therapeutic equivalents to bring their costs below the
FUL. AMP-based FULs also varied significantly throughout 2008 for 38
drugs, in some cases exceeding the average retail pharmacy acquisition
cost one month and falling below it in another month. While partly due
to monthly increases or decreases in AMPs, variation also occurred
because manufacturers did not report AMP data each month for 11 percent
of the therapeutically equivalent versions of the drugs in our sample.
If a manufacturer reports the AMP for the lowest-priced therapeutically
equivalent version of a drug one month but does not report it the next
month, the FUL may change.
In its written comments on a draft of this report, CMS disagreed with
our finding that if AMP-based FULs had been in place in the second
quarter of 2008, they would have been lower than average retail
pharmacy acquisition costs for most of the 83 drugs in our sample and
in the national aggregate. See enclosure IV for CMS's comments. In
particular, CMS expressed concerns about our data source used to
estimate average retail pharmacy acquisition costs, including that it
does not take into account discounts and rebates that drug
manufacturers may provide to retail pharmacies. CMS also expressed
concerns about our methodology and inconsistencies between our finding
and the findings of an HHS-OIG report, which the OIG shared with us
because it has not been publicly issued as of November 2009. However,
as we indicate in this report, data on discounts and rebates†pharmacies
receive are not readily available. We used the most complete, accurate,
and verifiable data sources available at the time of our analysis to
estimate average retail pharmacy acquisition costs. We believe that
these data are sufficiently accurate to achieve the objective of our
work. Furthermore, as discussed in detail later in this report, our
methodology is sound and any inconsistencies between our finding and
the findings of the HHS-OIG report, which was based on data from the
fourth quarter of 2007, are largely due to significant fluctuations in
drug prices over time. CMS also provided technical comments, which we
incorporated as appropriate.
Background:
Medicaid is a joint federal-state entitlement program that finances
medical services for certain low-income adults and children.[Footnote
25] While federal law generally requires that all state Medicaid
programs offer certain basic benefits, each state Medicaid program
determines the extent to which it will cover optional benefits.
Outpatient prescription drug coverage is an optional benefit that all
state Medicaid programs have elected to include in their Medicaid
benefit packages.
Medicaid Federal Upper Limits:
FULs were established in 1987 as a cost-containment strategy to limit
the amount that Medicaid could reimburse retail pharmacies for certain
multiple-source outpatient prescription drugs.[Footnote 26] CMS
publishes a list of drugs that have FULs in the State Medicaid Manual.
FULs are expressed per unit--for example, per tablet. As of September
2009, the list included approximately 740 multiple-source drugs.
CMS determines the FUL for a multiple-source outpatient prescription
drug by grouping a drug's therapeutically equivalent versions and
setting a FUL for each group. Each of a drug's therapeutically
equivalent versions has several published prices associated with it,
including the average wholesale price (AWP), wholesale acquisition cost
(WAC), and direct price (DP).[Footnote 27] All these prices are
published in each of the three national drug pricing compendia--First
DataBank, Medi-Span, and Red Book--which use different methods for
determining these published prices. The lowest published price for a
drug may be any one of these three prices. CMS sets a FUL by
identifying a drug's therapeutic equivalent with the lowest price--
either AWP, WAC, or DP--in any of the three national drug pricing
compendia, and multiplying that price by 150 percent. A state's total
reimbursements for Medicaid prescription drugs subject to FULs must not
exceed, in the aggregate, the payment levels established by the FULs
over a year. States may exceed the FUL for an individual prescription
drug as long as their aggregate expenditures for all prescription drugs
subject to FULs do not exceed the amounts that are calculated using the
rate established by the FUL.
State Medicaid programs consider several methods for reimbursing
pharmacies for multiple-source prescription drugs. In general, states
base their Medicaid reimbursements to a retail pharmacy for a covered
outpatient prescription drug on the lowest of the following: a state's
best estimate of retail pharmacies' acquisition costs for the drug; the
usual and customary charge[Footnote 28] of the retail pharmacy that
dispensed the drug; the FUL for the drug, if applicable; or the state's
maximum allowable cost[Footnote 29] (MAC) for the drug, if applicable.
When the FUL for a drug is not the lowest of these four amounts,
Medicaid typically reimburses pharmacies at a rate lower than the FUL.
Deficit Reduction Act of 2005:
The DRA methodology for setting FULs would require CMS to calculate
FULs as 250 percent of the AMP for the least costly of a drug's
therapeutically equivalent versions. AMP data are collected by CMS and
are currently not publicly available. (Figure 1 illustrates how
Medicaid FULs are calculated using 150 percent of the lowest published
price versus using 250 percent of the AMP for the least costly
therapeutic equivalent.)
Figure 1: Illustration of FUL Methodology:
[Refer to PDF for image: illustration]
FUL[A] using 150% of the lowest published price:
Therapeutic equivalent 1:
WAC[B]: 0.35˘; (0.35˘ per unit x 150% + 0.525˘ per unit);
DP[C]: 0.45˘;
AWP[D]: 0.99˘.
Therapeutic equivalent 2:
WAC[B]: 0.37˘;
DP[C]: 0.52˘;
AWP[D]: 0.91˘.
Therapeutic equivalent 3:
WAC[B]: 0.39˘;
DP[C]: 0.58˘;
AWP[D]: 0.95˘.
National drug pricing compendium 1: Drug X (˘ per unit).
FUL[A] using 250% of the AMP for the least costly therapeutic
equivalent:
Therapeutic equivalent 1:
AMP[E]: 0.25˘.
Therapeutic equivalent 2:
AMP[E]: 0.15˘; (0.15˘ per unit x 250% + 0.375˘ per unit).
Therapeutic equivalent 3:
AMP[E]: 0.22˘.
CMS[F]: Drug X (˘ per unit).
Source: GAO.
Note: The drug pricing compendia in fig.1 are published by First
DataBank, Medi-Span, and Red Book.
[A] FUL is the federal upper limit for reimbursement of certain
Medicaid outpatient prescription drugs.
[B] WAC is the manufacturer's list price for wholesalers or other
direct purchasers before any rebates, discounts, allowances, or other
price concessions.
[C] DP as published by First DataBank represents the manufacturer's
published catalog or list price for a drug product to nonwholesalers.
DP does not represent actual transaction prices and does not include
prompt pay or other discounts, rebates, or reductions.
[D] AWP is the average of the list prices that the manufacturer
suggests wholesalers charge pharmacies.
[E] AMP represents the average of prices paid to manufacturers by
wholesalers for a drug distributed to the retail pharmacy class of
trade, including retail pharmacies.
[F] CMS is the agency that oversees Medicaid.
[End of figure]
The DRA included additional provisions relating to prescription drugs.
One provision changed the criteria under which FULs must be
established. Under the current methodology, FULs must be established
for multiple-source drugs with three or more therapeutically equivalent
products. However, the DRA would require the establishment of FULs for
multiple-source drugs with two or more therapeutically equivalent
products. The DRA also included several changes relating to the
calculation of AMP. For example, it required that prompt payment
discounts be excluded when manufacturers calculate AMP.
Implementation of AMP-Based FULs:
CMS issued a final rule in July 2007 to implement the AMP-based FUL
provisions of the DRA. The final rule provides instructions for drug
manufacturers in calculating and reporting AMPs, among other things.
The final rule took effect in October 2007, which was the first month
that drug manufacturers began reporting monthly AMP data to CMS.
However, the November 2007 lawsuit filed by the NACDS and NCPA claimed
that the AMP rule would unlawfully change the methodology for
reimbursement of pharmacies on the grounds that it was contrary to
statute, among other things. In December 2007, the U.S. District Court
for the District of Columbia issued a preliminary injunction ordering
CMS not to implement the final rule to the extent that it affects
Medicaid reimbursement rates for retail pharmacies. However, the
preliminary injunction allowed the use of AMP as defined in the final
rule for purposes of the Medicaid drug rebate program.[Footnote 30]
Therefore, drug manufacturers are continuing to report AMPs on a
monthly and a quarterly basis in accordance with the provisions of the
July 2007 rule and CMS is using these data for the purposes of the
Medicaid drug rebate program. On July 15, 2008, MIPPA was enacted and
prohibited CMS from taking any action before October 1, 2009, to
implement the AMP-based FULs. As of October 1, 2009, the lawsuit was
pending and the preliminary injunction remained in effect.
Median AMP-Based FULs Would Have Been Generally Lower Than Average
Retail Pharmacy Acquisition Costs:
Had AMP-based FULs been in place in the second quarter of 2008 they
would have been lower than average retail pharmacy acquisition costs
for most of the individual drugs in our sample and in the aggregate.
However, pharmacies may be able to acquire therapeutically equivalent
versions of most drugs at prices lower than the AMP-based FUL. Further,
AMP-based FULs varied significantly throughout 2008 for about half the
drugs in our sample.
For Most Individual Drugs in Our Sample, AMP-Based FULs Would Have Been
Generally Lower Than Average Retail Pharmacy Acquisition Costs:
The median AMP-based FULs that we calculated for the second quarter of
2008 would have been generally lower than average retail pharmacy
acquisition costs for 54 of the 83 drugs in our sample. Of these 54
drugs, 44 drugs had median AMP-based FULs that would have been at least
25 percent below average retail pharmacy acquisition costs. However,
more than a third of the drugs in our sample (29 of 83) had median AMP-
based FULs equal to or greater than acquisition costs. (See enclosure
II for a list of the 54 drugs in our sample for which the median AMP-
based FULs would have been below the average retail pharmacy
acquisition costs and the 29 drugs for which the median AMP-based FULs
would have been above the average retail pharmacy acquisition costs.)
While median AMP-based FULs would have been generally lower than
acquisition costs across our entire sample of drugs, this difference
was most pronounced for the 34 high-expenditure drugs in our sample,
compared with the 32 high-utilization drugs and the 17 drugs that
overlapped both categories. Our results were similar when we compared
the monthly AMP-based FULs for April, May, and June of 2008 to
acquisition costs for the second quarter of 2008.
These findings differ somewhat from the findings in our 2006 report,
which found that less than a quarter of the drugs in our sample (18 of
the 77) had AMP-based FULs equal to or greater than acquisition costs.
The outlier provision included in CMS's July 2007 final rule--and
therefore not taken into account in our 2006 report--increased the
number of drugs for which AMP-based FULs would have been sufficient to
cover acquisition costs. Without the outlier provision, the number of
drugs with AMP-based FULs sufficient to cover acquisition costs would
have been 25 drugs instead of 29 drugs.
High-Expenditure Drugs:
For 29 of the 34 high-expenditure drugs in our sample, the median AMP-
based FULs we calculated for the second quarter of 2008 would have been
lower than the average retail pharmacy acquisition costs for this
period. The AMP-based FULs for 25 of these 29 drugs would have been at
least 25 percent below average retail pharmacy acquisition costs. (See
figure 2.)
Figure 2: Comparison of Median AMP-Based FULs and Average Retail
Pharmacy Acquisition Costs for 34 High-Expenditure Outpatient Drugs in
Medicaid, Second Quarter 2008:
[Refer to PDF for image: vertical bar graph]
The median AMP-based FULs for these 29 drugs would have been lower than
the average retail pharmacy acquisition costs:
High-expenditure drugs (29):
Percentage difference: -97;
Percentage difference: -95.9;
Percentage difference: -95.8;
Percentage difference: -95.1;
Percentage difference: -93.9;
Percentage difference: -91.2;
Percentage difference: -85;
Percentage difference: -76.5;
Percentage difference: -74.9;
Percentage difference: -66.9;
Percentage difference: -63.5;
Percentage difference: -63.2;
Percentage difference: -63;
Percentage difference: -62.5;
Percentage difference: -59.7;
Percentage difference: -59.1;
Percentage difference: -47.8;
Percentage difference: -47.3;
Percentage difference: -43.1;
Percentage difference: -41.3;
Percentage difference: -38.1;
Percentage difference: -33.5;
Percentage difference: -31.4;
Percentage difference: -29;
Percentage difference: -28.3;
Percentage difference: -23.5;
Percentage difference: -5.5;
Percentage difference: -4;
Percentage difference: -2.7.
The median AMP-based FULs for these 5 drugs would have been higher than
the average retail pharmacy acquisition costs:
High-expenditure drugs (5):
Percentage difference: 7;
Percentage difference: 18.9;
Percentage difference: 53.4;
Percentage difference: 61.9;
Percentage difference: 169.2.
Source: GAO analysis of utilization and FUL data from CMS and
acquisition cost data from IMS Health.
Note: The average retail pharmacy acquisition cost data that we
obtained from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts.
[End of figure]
High-Utilization Drugs:
Conversely, only 13 of the 32 high-utilization drugs in our sample had
median AMP-based FULs that would have been lower than the average
retail pharmacy acquisition costs. The AMP-based FULs for 9 of these 13
drugs would have been at least 25 percent below average retail pharmacy
acquisition costs. (See figure 3).
Figure 3: Comparison of Median AMP-Based FULs and Average Retail
Pharmacy Acquisition Costs for 32 High-Utilization Outpatient Drugs in
Medicaid, Second Quarter 2008:
[Refer to PDF for image: vertical bar graph]
The median AMP-based FULs for these 13 drugs would have been lower than
the average retail pharmacy acquisition costs:
High-utilization drugs(13):
Percentage difference: -89.8;
Percentage difference: -68.9;
Percentage difference: -56.3;
Percentage difference: -53.9;
Percentage difference: -48.9;
Percentage difference: -44.1;
Percentage difference: -36.7;
Percentage difference: -35.6;
Percentage difference: -26.2;
Percentage difference: -23.8;
Percentage difference: -6.2;
Percentage difference: -4.1;
Percentage difference: -3.7.
The median AMP-based FULs for these 19 drugs would have been higher
than the average retail pharmacy acquisition costs:
High-utilization drugs(19):
Percentage difference: 7.7;
Percentage difference: 8.3;
Percentage difference: 12;
Percentage difference: 12.1;
Percentage difference: 18;
Percentage difference: 24.7;
Percentage difference: 35.9;
Percentage difference: 43.8;
Percentage difference: 49.5;
Percentage difference: 51.9;
Percentage difference: 52.4;
Percentage difference: 55.5;
Percentage difference: 81.5;
Percentage difference: 83.3;
Percentage difference: 94.2;
Percentage difference: 98.9;
Percentage difference: 109.8;
Percentage difference: 197.5;
Percentage difference: 1,616.6.
Source: GAO analysis of utilization and FUL data from CMS and
acquisition cost data from IMS Health.
Note: The average retail pharmacy acquisition cost data that we
obtained from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts.
[End of figure]
High-Expenditure and High-Utilization Drugs:
For 12 of the 17 drugs in our sample that overlapped both categories,
the median AMP-based FULs we calculated would have been below average
retail pharmacy acquisition costs for the second quarter of 2008.
Further, the median AMP-based FULs for 10 of these drugs would have
been at least 25 percent below average retail pharmacy acquisition
costs. (See figure 4.)
Figure 4: Comparison of Median AMP-Based FULs and Average Retail
Pharmacy Acquisition Costs for 17 Outpatient Drugs That Were Both High-
Expenditure and High-Utilization in Medicaid, Second Quarter 2008:
[Refer to PDF for image: vertical bar graph]
High-expenditure and high-utilization drugs:
The median AMP-based FULs for these 12 drugs would have been lower than
the average retail pharmacy acquisition costs:
High-expenditure and high-utilization drugs (12):
Percentage difference: -88.2;
Percentage difference: -70.8;
Percentage difference: -49.8;
Percentage difference: -49.6;
Percentage difference: -48.5;
Percentage difference: -43;
Percentage difference: -37.7;
Percentage difference: -30.8;
Percentage difference: -29.8;
Percentage difference: -27.6;
Percentage difference: -22.4;
Percentage difference: -10.
The median AMP-based FULs for these 5 drugs would have been higher than
the average retail pharmacy acquisition costs:
High-expenditure and high-utilization drugs (5):
Percentage difference: 0.7;
Percentage difference: 9.3;
Percentage difference: 14.7;
Percentage difference: 34.6;
Percentage difference: 92.
Source: GAO analysis of utilization and FUL data from CMS and
acquisition cost data from IMS Health.
Note: The average retail pharmacy acquisition cost data that we
obtained from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts.
[End of figure]
Median AMP-based FULs Would Have Been Lower Than Acquisition Costs in
the Aggregate:
In the aggregate, for our sample of 83 drugs, the median AMP-based FULs
we calculated for the second quarter of 2008 would have been 17 percent
less than the average retail pharmacy acquisition costs for the same
period, when weighted by drug utilization at the national level.
However, this difference varied significantly from state to
state.[Footnote 31] Aggregate median AMP-based FULs would have been
between 57 percent less than and 49 percent greater than the aggregate
acquisition costs, when weighted by drug utilization in each individual
state. In 11 states, the aggregate AMP-based FULs covered at least 100
percent of aggregate acquisition costs, and in another 19 states, the
aggregate AMP-based FULs covered more than 90, but less than 100
percent. In 10 other states, however, the aggregate AMP-based FULs
covered 80 percent or less. (See figure 5.) (See enclosure III for a
comparison in the aggregate of median AMP-based FULs to average retail
pharmacy acquisition costs for the 83 drugs in our sample for each
state.)
Figure 5: Comparison, in the Aggregate for 83 Drugs, of Median AMP-
based FULs to Average Retail Pharmacy Acquisition Costs, Second Quarter
2008:
[Refer to PDF for image: vertical bar graph]
In the aggregate, AMP-based FULs would have been less than average
retail pharmacy acquisition costs in 36 states and nationally:
States (36):
Percentage covered by the aggregate FUL: 42.7;
Percentage covered by the aggregate FUL: 64.5;
Percentage covered by the aggregate FUL: 64.5;
Percentage covered by the aggregate FUL: 64.6;
Percentage covered by the aggregate FUL: 71;
Percentage covered by the aggregate FUL: 72.3;
Percentage covered by the aggregate FUL: 78.3;
Percentage covered by the aggregate FUL: 78.5;
Percentage covered by the aggregate FUL: 78.5;
Percentage covered by the aggregate FUL: 79.6;
Percentage covered by the aggregate FUL: 82.7;
Percentage covered by the aggregate FUL: 82.9 (National aggregate);
Percentage covered by the aggregate FUL: 85.6;
Percentage covered by the aggregate FUL: 86.3;
Percentage covered by the aggregate FUL: 86.8;
Percentage covered by the aggregate FUL: 87;
Percentage covered by the aggregate FUL: 88.2;
Percentage covered by the aggregate FUL: 89.7;
Percentage covered by the aggregate FUL: 90.4;
Percentage covered by the aggregate FUL: 92.4;
Percentage covered by the aggregate FUL: 93.2;
Percentage covered by the aggregate FUL: 93.2;
Percentage covered by the aggregate FUL: 93.5;
Percentage covered by the aggregate FUL: 94.4;
Percentage covered by the aggregate FUL: 94.6;
Percentage covered by the aggregate FUL: 94.9;
Percentage covered by the aggregate FUL: 95.3;
Percentage covered by the aggregate FUL: 95.9;
Percentage covered by the aggregate FUL: 96.4;
Percentage covered by the aggregate FUL: 97;
Percentage covered by the aggregate FUL: 97.5;
Percentage covered by the aggregate FUL: 97.5;
Percentage covered by the aggregate FUL: 97.8;
Percentage covered by the aggregate FUL: 98.1;
Percentage covered by the aggregate FUL: 98.3;
Percentage covered by the aggregate FUL: 99.2;
Percentage covered by the aggregate FUL: 99.3.
In the aggregate, AMP-based FULs would have been greater than average
retail pharmacy acquisition costs in 11 states:
States (11):
Percentage covered by the aggregate FUL: 100.6;
Percentage covered by the aggregate FUL: 104.1;
Percentage covered by the aggregate FUL: 104.2;
Percentage covered by the aggregate FUL: 105.6;
Percentage covered by the aggregate FUL: 106.7;
Percentage covered by the aggregate FUL: 107.1;
Percentage covered by the aggregate FUL: 109.3;
Percentage covered by the aggregate FUL: 112.9;
Percentage covered by the aggregate FUL: 116.8;
Percentage covered by the aggregate FUL: 117.6;
Percentage covered by the aggregate FUL: 149.1.
Source: GAO analysis of utilization and FUL data from CMS and
acquisition cost data from IMS Health.
Note: The average retail pharmacy acquisition cost data that we
obtained from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts. We used
national pharmacy acquisition costs to conduct this analysis because
acquisition cost data were not available from IMS Health at the state
level.
At the time we requested them from CMS, drug utilization data were not
available for the second quarter of 2008 for Alabama, Arizona, Rhode
Island, and Tennessee and the U.S. territories of American Samoa, Guam,
Northern Mariana Islands, Puerto Rico, and the Virgin Islands. Because
we lacked utilization data for these states and territories, they have
been excluded from our aggregate analyses.
[End of figure]
Pharmacies May Be Able to Acquire Therapeutically Equivalent Versions
of Most Drugs at Costs Below Their FULs:
For 64 of the 83 drugs in our sample, or 77 percent, we found that at
least one therapeutically equivalent version had average retail
pharmacy acquisition costs that would have been below the median AMP-
based FUL in the second quarter of 2008. (See table 1.) For 38 of these
drugs, at least half of the Medicaid utilization during this quarter
was for therapeutically equivalent versions for which acquisition costs
would have been less than the median AMP-based FUL, including 23 drugs
for which at least 90 percent of Medicaid utilization was for such
versions. Across all 83 drugs, 43 percent of each drug's Medicaid
utilization, on average, was for therapeutically equivalent versions
for which acquisition costs would have been below the AMP-based FUL.
(See enclosure I for the percentage of utilization accounted for by
therapeutically equivalent versions of each drug with average pharmacy
acquisition costs that would have been below the AMP-based FUL.)
Table 1: Percentage of Each Drug's Medicaid Utilization That Is
Accounted for by Therapeutic Equivalents with Average Retail Pharmacy
Acquisition Costs That Would Have Been Below the Median AMP-based FULs,
Second Quarter 2008:
Percentage of Medicaid utilization: 90.0 percent - 100.0 percent;
Number of drugs: 23.
Percentage of Medicaid utilization: 75.0 percent - 89.9 percent;
Number of drugs: 6.
Percentage of Medicaid utilization: 50.0 percent - 74.9 percent;
Number of drugs: 9.
Percentage of Medicaid utilization: 25.0 percent - 49.9 percent;
Number of drugs: 5.
Percentage of Medicaid utilization: 0.1 percent - 24.9 percent;
Number of drugs: 21.
Percentage of Medicaid utilization: Zero percent;
Number of drugs: 19.
Percentage of Medicaid utilization: Total;
Number of drugs: 83.
Source: GAO analysis of utilization and FUL data from CMS and average
retail pharmacy acquisition cost data from IMS Health.
Note: The average retail pharmacy acquisition cost data that we
obtained from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts.
[End of table]
In addition, of the 54 drugs in our sample with average retail pharmacy
acquisition costs that would have been above the median AMP-based FULs,
35 had one or more therapeutically equivalent versions with average
retail pharmacy acquisition costs that would have been below the FUL,
which accounted for an average of 27 percent of each drug's Medicaid
utilization. Therefore, to the extent that the lower cost,
therapeutically equivalent versions of these drugs are readily
available to pharmacies--and that pharmacies choose to acquire them--it
may be possible for pharmacies to reduce their costs for many of these
drugs to levels below the FUL by increasing their use of lower-priced
therapeutic equivalents.
We also found that the high-utilization drugs in our sample were more
likely than the high-expenditure drugs to have therapeutically
equivalent versions with average retail pharmacy acquisition costs that
would have been below their FULs. Specifically, for 22 of 32 (69
percent) high-utilization drugs, at least half of the Medicaid
utilization during the second quarter of 2008 was accounted for by
therapeutically equivalent versions with acquisition costs that would
have been below their median AMP-based FULs, while this was true for
only 10 of 34 (29 percent) high-expenditure drugs and 6 of 17 (35
percent) of the drugs that were both high-expenditure and high-
utilization.
AMP-Based FULs Varied Significantly for Some Drugs in 2008, Affecting
the Relationship Between FULs and Acquisition Costs:
For 38 drugs in our sample of 83 drugs--or 46 percent--monthly AMP-
based FULs varied by at least 100 percent throughout 2008, which
affected the relationship between FULs and average retail pharmacy
acquisition costs and in some cases affected whether AMP-based FULs
would have been higher or lower than acquisition costs in each month.
For example, for 16 of the 83 drugs in our sample, we found that the
monthly variation in AMP-based FULs would have resulted in the FUL for
a drug exceeding the average retail pharmacy acquisition cost in at
least one month during the second quarter of 2008 and falling below the
acquisition cost in another month during that same quarter.
While monthly variation in AMP-based FULs was partly due to monthly
increases or decreases in the AMPs used to set the FULs, missing AMP
data in each month of 2008 also accounted for some variation. Although
CMS requires drug manufacturers to submit monthly AMP data no later
than 30 days after the end of the prior month, in 2008, manufacturers
did not report AMP data to CMS for an average of 11 percent of the
therapeutically equivalent versions of the 83 drugs in our sample in
each month. We found that missing AMP data affected the AMP-based FULs
because CMS calculates them monthly, generally using the lowest AMP for
each drug subject to a FUL.[Footnote 32] Therefore, if a manufacturer
reports the AMP for the lowest-priced therapeutically equivalent
version of a drug in one month but does not report it in a subsequent
month, the FUL for the second month will be based on the AMP for a
different version of that drug, which may result in a change in the FUL
between the two months.
The monthly variation in AMP-based FULs may make it difficult for
states to reimburse pharmacies in accordance with AMP-based FULs,
because they may need to adjust their reimbursement rates on a monthly
basis in order to reimburse pharmacies the amounts corresponding to the
FULs. CMS officials told us that, if the agency is permitted to
implement AMP-based FULs, CMS will assist states in preparing to use
FULs that are updated monthly. The officials also stated that public
disclosure of AMP data along with the implementation of AMP-based FULs
should lessen the monthly variation in the FULs because manufacturers
would likely increase their compliance with the monthly AMP reporting
requirement. CMS officials believe that manufacturers would increase
compliance because manufacturers who do not comply with the requirement
could be easily identified.
Agency Comments and Our Evaluation:
HHS provided us with CMS's written comments on a draft of this report.
The agency's comments are reprinted in enclosure IV. CMS disagreed with
our finding that if AMP-based FULs had been in place in the second
quarter of 2008, they would have been lower than average retail
pharmacy acquisition costs for most of the 83 drugs in our sample and
in the national aggregate. In particular, CMS expressed concerns about
our data source used to estimate average retail pharmacy acquisition
costs, including that it does not take into account discounts and
rebates that drug manufacturers and wholesalers may provide to retail
pharmacies. CMS also expressed concerns about our methodology and
inconsistencies between our finding and the findings of an HHS-OIG
report. However, as we indicate in this report and†address below, data
on discounts and rebates†pharmacies receive are not readily available.
We used the most complete, accurate, and verifiable data source
available at the time of our analysis to estimate average retail
pharmacy acquisition costs. We believe that these data are sufficiently
accurate to achieve the objective of our work. Furthermore, as
discussed below, our methodology is sound and any inconsistencies
between our finding and the findings of the HHS-OIG report are largely
due to significant fluctuations in drug prices over time.
CMS questioned the validity of our estimation of national average
retail pharmacy acquisition costs because we were unable to account for
certain discounts and rebates retail pharmacies may receive from
wholesalers and drug manufacturers, if they are not accounted for in
invoice prices. In our report, we state that the IMS Health data did
not account for such discounts and rebates, and we identified this as a
limitation of our analysis. Had we been able to fully include discounts
and rebates in our estimation of average retail pharmacy acquisition
costs, these discounts and rebates would had to have averaged at least
17 percent of the average retail pharmacy acquisition cost in order to
offset the difference between AMP-based FULs and pharmacy acquisition
costs in the aggregate.[Footnote 33]
Further, we know of no data sources of national average pharmacy
acquisition costs for multiple-source outpatient prescription drugs
that fully account for discounts and rebates. CMS stated that an HHS-
OIG report, which the OIG shared with us because it has not been
publicly issued as of November 2009, was able to partially account for
discounts and rebates.[Footnote 34] However, as CMS acknowledges, the
data on which the OIG relied also had limitations. Specifically, only
half of the drug distributors that responded to the OIG's survey
reported data on discounts and rebates. The OIG collected its pharmacy
acquisition cost data for the 50 drugs in its sample from a selection
of 4 drug distributors. Two of the 4 drug distributors did not report
data on discounts and rebates.[Footnote 35] Moreover, accounting for
discounts and rebates is difficult because retail pharmacies negotiate
their discounts and rebates based on various factors and can negotiate
them on a manufacturer's entire line of products rather than per drug.
CMS also questioned the validity of the pharmacy acquisition cost data
that we acquired from IMS Health, because of significant variation
between these data and the pharmacy acquisition cost data used by the
OIG. While we cannot speak to the validity of the OIG's survey data
because we did not evaluate it, we used the most complete and accurate
data available at the time of our analysis to estimate average retail
pharmacy acquisition costs, as stated previously. Furthermore, we do
not believe that the variation between the two data sources indicates
that either is invalid because significant variation in both pharmacy
acquisition costs and AMPs can be expected to occur over time, and the
OIG data were from the fourth quarter of 2007 and therefore 6 months
older than our data, on average. To illustrate this, we analyzed
variation in AMP data for each therapeutically equivalent version of
the 83 drugs in our sample across 2008. We found that AMPs, which
represent actual transaction prices between drug manufacturers and
wholesalers, varied by as much as 1,100 percent throughout 2008 for
individual therapeutically equivalent versions of drugs and that 24
percent of therapeutically equivalent versions of the drugs in our
sample varied by more than 100 percent during that year. In addition,
we compared average retail pharmacy acquisition costs between the first
quarter of 2006 and the second quarter of 2008 for the therapeutically
equivalent versions of drugs that were included in both our previous
report on AMP-based FULs and this report.[Footnote 36] We found that
the pharmacy acquisition costs in the second quarter of 2008 were
between 97 percent lower and 993 percent higher than in the first
quarter of 2006. Consequently, our finding should not be compared
directly to the OIG's findings, because the two studies were conducted
using data from different time periods.
CMS also stated that the OIG report provides a more accurate comparison
of AMP-based FULs to pharmacy acquisition costs, because the OIG was
able to analyze the lowest pharmacy acquisition cost among all
transactions. While we did not conduct our comparison based on the
lowest pharmacy acquisition cost, our report includes an analysis of
the therapeutically equivalent versions of each drug in our sample that
pharmacies may be able to acquire at a cost below AMP-based FULs. As we
state in our report, we found that for 64 drugs or 77 percent of the
drugs in our sample, at least one therapeutically equivalent version
had average retail pharmacy acquisition costs that would have been
below the median AMP-based FUL in the second quarter of 2008. However,
in many cases, pharmacies are not currently purchasing these versions.
CMS stated that we did not release source data or evidence of how IMS
Health arrived at the acquisition costs used in our comparison. We
clarified our report to explain that on a monthly basis, IMS Health
collects data on drugs purchased by retail pharmacies from about 100
drug manufacturers and about 500 distribution centers. These
manufacturers and distribution centers provide data on the number of
units sold, and a portion of them provide data on actual retail
pharmacy acquisition costs. For those manufacturers and distribution
centers that only provide data on the number of units sold, IMS Health
estimates retail pharmacy acquisition costs based on the actual
acquisition cost data it was able to obtain from others. Once IMS
Health determines average retail pharmacy acquisition costs from data
it collects, it projects these data to represent national average
retail pharmacy acquisition costs using a model that is reviewed
monthly. In addition, IMS Health conducts detailed data reliability
assessments, which include comparing monthly data from drug
manufacturers and distribution centers to data from the prior month and
the prior year in order to ensure consistency and comparing reported
pricing data against published prices to ensure that the data IMS
Health receive are in fact transaction prices rather than the published
prices. Consistent with our data use agreement with IMS Health, we did
not include the acquisition cost data used in our analysis in our
report or otherwise disclose them to CMS because, while they are
commercially available, they are proprietary.
CMS stated that it was concerned about our use of median AMP-based FUL
data to compare AMP-based FULs to pharmacy acquisition costs because
AMP-based FULs are calculated on a monthly basis. We used the median
AMP-based FULs for the second quarter of 2008 because CMS reports
utilization data on a quarterly basis and in order to mitigate the
effects of monthly variation in AMP-based FULs on this comparison. As
we stated in our report, for 16 of the 83 drugs in our sample, monthly
variation in the AMP-based FULs was significant enough to have resulted
in the FUL for a drug exceeding the average retail pharmacy acquisition
cost in at least one month during the second quarter of 2008 and
falling below the acquisition cost in another month during that same
quarter. Comparing the data on a monthly basis would have increased the
risk that monthly variation in AMP-based FULs would have
inappropriately affected the results of our analysis.
CMS also stated that our sample of 83 drugs is not a true reflection of
all drugs that would have been subject to AMP-based FULs in the second
quarter of 2008 because it only included 6 percent of such drugs. As we
stated in our report, our sample of drugs is not representative of all
drugs that would have been subject to AMP-based FULs. However, our
sample represented 64 percent of total Medicaid utilization and 52
percent of total Medicaid expenditures for drugs that would have been
subject to AMP-based FULs in the second quarter of 2008.
CMS noted that our analysis did not address how average retail pharmacy
acquisition costs compare to current FULs that are based on published
prices. A comparison of average retail pharmacy acquisition costs to
current FULs was outside the scope of this report. Furthermore, this
comparison has been well-documented by the HHS-OIG and others.[Footnote
37] In addition, CMS noted that our analysis did not address existing
state cost-containment efforts, such as MAC programs, to reduce
Medicaid reimbursements for outpatient prescription drugs. While the
relationship between AMP-based FULs and state Medicaid cost-containment
efforts is a valid area of analysis, this issue was also beyond the
scope of our report.
In response to our concerns about monthly variation in the AMP-based
FULs, CMS noted that it is aware of monthly fluctuations in AMP-based
FULs and that it is considering measures to ensure that pharmacy
reimbursement is fair and that drug manufacturers report AMP data in a
timely manner. The agency also noted that public disclosure of AMP data
would help bring transparency to drug prices and help ensure that
pharmacies can determine which therapeutically equivalent version of
each drug could be acquired at a cost below its AMP-based FULs.
CMS also provided technical comments, which we incorporated as
appropriate.
As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
after its issue date. At that time, we will send copies to the
Secretary of Health and Human Services and interested congressional
committees. The report will also be available at no charge on GAO's Web
site at [hyperlink, http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-7114 or dickenj@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff members who made key
contributions to this report are listed in enclosure V.
Sincerely yours,
Signed by:
John E. Dicken:
Director, Health Care:
[End of section]
Enclosure I:
The 83 Medicaid Outpatient Prescription Drugs GAO Reviewed, Sample
Category into which Each Drug Falls, and Percentage of Each Drug's
Medicaid Utilization for which the Average Pharmacy Acquisition Cost
Would Have Been Below the Median AMP-Based FUL, Second Calendar Quarter
of 2008:
Table 2:
Drug name and strength: Acetaminophen;
hydrocodone bitartrate 500mg/15ml; 7.5mg/15ml;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
2.3.
Drug name and strength: Acetaminophen;
hydrocodone bitartrate 325mg; 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
10.0.
Drug name and strength: Acetaminophen;
hydrocodone bitartrate 500mg; 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.5.
Drug name and strength: Acetaminophen;
hydrocodone bitartrate 500mg; 5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
97.2.
Drug name and strength: Acetaminophen;
oxycodone hydrochloride 325mg; 5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
85.7.
Drug name and strength: Albuterol sulfate 0.083%;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
100.0.
Drug name and strength: Alendronate sodium 70mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
54.1.
Drug name and strength: Alprazolam 0.25mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Alprazolam 0.5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Alprazolam 1mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Amlodipine besylate 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Amlodipine besylate 5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
3.8.
Drug name and strength: Amoxicillin 125mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.4.
Drug name and strength: Amoxicillin 250mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.7.
Drug name and strength: Amoxicillin 400mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
79.6.
Drug name and strength: Amoxicillin;
clavulanic acid 400mg/5ml; 57mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
54.4.
Drug name and strength: Amoxicillin;
clavulanic acid 600mg/5ml; 42.9mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
7.8.
Drug name and strength: Amoxicillin;
clavulanic acid 875mg; 125mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
93.1.
Drug name and strength: Azithromycin 100mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
72.0.
Drug name and strength: Azithromycin 200mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Azithromycin 250mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
35.0.
Drug name and strength: Bupropion hydrochloride 150mg;
Dosage form: Extended release tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
1.2.
Drug name and strength: Bupropion hydrochloride 300mg;
Dosage form: Extended release tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
55.0.
Drug name and strength: Carbamazepine 100mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.8.
Drug name and strength: Cefdinir 300mg;
Dosage form: Capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
14.6.
Drug name and strength: Cefdinir 125mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
86.2.
Drug name and strength: Cefdinir 250mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
65.1.
Drug name and strength: Cephalexin 250mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.4.
Drug name and strength: Chlorhexidine gluconate 0.12%;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
77.2.
Drug name and strength: Clonazepam 0.5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
7.4.
Drug name and strength: Clonazepam 1mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
41.0.
Drug name and strength: Clonidine hydrochloride 0.1mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.7.
Drug name and strength: Clozapine 100mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
91.4.
Drug name and strength: Codeine phosphate;
promethazine hydrochloride 10mg/5ml; 6.25mg/5ml;
Dosage form: Syrup;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
98.7.
Drug name and strength: Cyclobenzaprine hydrochloride 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Desmopressin acetate 0.2mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Dextromethorphan hydrobromide;
promethazine hydrochloride 15mg/5ml; 6.25mg/5ml;
Dosage form: Syrup;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
100.0.
Drug name and strength: Diazepam 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.9.
Drug name and strength: Diphenhydramine hydrochloride 12.5mg/5ml;
Dosage form: Elixir;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
100.0.
Drug name and strength: Fentanyl 100mcg;
Dosage form: Film;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Fentanyl 50mcg/hr;
Dosage form: Film;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Fentanyl 75mcg/hr;
Dosage form: Film;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Fluoxetine hydrochloride 20mg;
Dosage form: Capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.3.
Drug name and strength: Fluticasone propionate 0.05mg;
Dosage form: Spray;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Folic acid 1mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Gabapentin 300mg;
Dosage form: Capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.7.
Drug name and strength: Gabapentin 600mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Gabapentin 800mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
4.7.
Drug name and strength: Griseofulvin microcrystalline 125mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
7.0.
Drug name and strength: Hydrochlorothiazide 25mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Ibuprofen 100mg/5ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.9.
Drug name and strength: Ibuprofen 600mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.9.
Drug name and strength: Ibuprofen 800mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.9.
Drug name and strength: Lactulose 10gm/15ml;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.3.
Drug name and strength: Lamotrigine 25mg;
Dosage form: Chewable tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
100.0.
Drug name and strength: Lorazepam 0.5mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.4.
Drug name and strength: Lorazepam 1mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
3.0.
Drug name and strength: Medroxyprogesterone acetate 150mg/ml;
Dosage form: Injectable;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
42.7.
Drug name and strength: Metformin hydrochloride 500mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Methadone hydrochloride 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
99.3.
Drug name and strength: Metoclopramide hydrochloride 5mg/5ml;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
58.4.
Drug name and strength: Mupirocin 2%;
Dosage form: Ointment;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
97.8.
Drug name and strength: Nystatin 100000u/ml;
Dosage form: Suspension;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
74.0.
Drug name and strength: Ofloxacin 0.3%;
Dosage form: Solution/drops (ophthalmic);
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
58.8.
Drug name and strength: Ofloxacin 0.3%;
Dosage form: Solution/drops (otic);
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.4.
Drug name and strength: Omeprazole 20mg;
Dosage form: Delayed release capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
20.8.
Drug name and strength: Oxcarbazepine 300mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.1.
Drug name and strength: Oxcarbazepine 600mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.1.
Drug name and strength: Pantoprazole sodium 40mg;
Dosage form: Delayed release tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
100.0.
Drug name and strength: Paroxetine hydrochloride 20mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
17.9.
Drug name and strength: Phenytoin sodium 100mg extended;
Dosage form: Capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.5.
Drug name and strength: Polyethylene glycol 3350 17gm/scoopful;
Dosage form: Solution;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Ranitidine hydrochloride 15mg/ml;
Dosage form: Syrup;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Ranitidine hydrochloride 150mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
80.5.
Drug name and strength: Ribavirin 200mg;
Dosage form: Capsule;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
28.3.
Drug name and strength: Sertraline hydrochloride 100mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.1.
Drug name and strength: Sertraline hydrochloride 50mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Simvastatin 20mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.0.
Drug name and strength: Simvastatin 40mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
0.6.
Drug name and strength: Tramadol hydrochloride 50mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization and high expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
73.2.
Drug name and strength: Triamcinolone acetonide 0.1%;
Dosage form: Cream;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
79.3.
Drug name and strength: Valproic acid 250mg/5ml;
Dosage form: Syrup;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
utilization;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
94.1.
Drug name and strength: Zolpidem tartrate 10mg;
Dosage form: Tablet;
Sample category into which each drug falls (high utilization, high
expenditure, or high utilization and high expenditure): High
expenditure;
Percentage of each drug's Medicaid utilization that was accounted for
by therapeutically equivalent versions with an average pharmacy
acquisition cost that would have been below the median AMP-based FUL:
37.0.
Source: GAO analysis of utilization and FUL data from CMS and average
retail pharmacy acquisition cost data from IMS Health.
Notes: Our sample contained 83 multiple-source outpatient prescription
drugs for the second quarter of 2008, which comprised 32 drugs that
were in the top 50 for Medicaid utilization, 34 drugs that were in the
top 50 for Medicaid expenditures, and 17 drugs that were in the top 50
for both utilization and expenditures. Dispensing fees were excluded
when calculating Medicaid expenditures.
The average retail pharmacy acquisition cost data that we obtained from
IMS Health do not account for rebates and discounts that pharmacies may
receive from wholesalers or manufacturers, if they are not reflected in
invoice prices. We were unable to identify any data sources of
acquisition costs for multiple-source outpatient prescription drugs
that account for rebates and discounts.
[End of table]
[End of enclosure]
Enclosure II:
Comparison of Average Retail Pharmacy Acquisition Costs to Median
Average Manufacturer Price (AMP)-Based Federal Upper Limits (FUL) for
the 83 Medicaid Outpatient Prescription Drugs GAO Reviewed, Second
Quarter of 2008:
Table 3:
Drugs with AMP-based FULs that would have been above the average retail
pharmacy acquisition cost:
* Acetaminophen; hydrocodone bitartrate 500mg; 10mg (tablet);
* Acetaminophen; hydrocodone bitartrate 500mg; 5mg (tablet);
* Acetaminophen; oxycodone hydrochloride 325mg; 5mg (tablet);
* Albuterol sulfate 0.083% (solution);
* Amoxicillin 125mg/5ml (suspension);
* Amoxicillin 250mg/5ml (suspension);
* Amoxicillin 400mg/5ml (suspension);
* Amoxicillin; clavulanic acid 400mg/5ml; 57mg/5ml (suspension);
* Carbamazepine 100mg/5ml (suspension);
* Cefdinir 125mg/5ml (suspension);
* Cefdinir 250mg/5ml (suspension);
* Cephalexin 250mg/5ml (suspension);
* Chlorhexidine gluconate 0.12% (solution);
* Clonidine hydrochloride 0.1mg (tablet);
* Clozapine 100mg (tablet);
* Codeine phosphate; promethazine hydrochloride 10mg/5ml; 6.25mg/5ml
(syrup);
* Dextromethorphan hydrobromide; promethazine hydrochloride
15mg/5ml;6.25mg/5ml (syrup);
* Diazepam 10mg (tablet);
* Diphenhydramine hydrochloride 12.5mg/5ml (elixir);
* Ibuprofen 100mg/5ml (suspension);
* Ibuprofen 600mg (tablet);
* Ibuprofen 800mg (tablet);
* Lactulose 10gm/15ml (solution);
* Lamotrigine 25mg (chewable tablet);
* Methadone hydrochloride 10mg (tablet);
* Metoclopramide hydrochloride 5mg/5ml (solution);
* Mupirocin 2% (ointment);
* Pantoprazole sodium 40mg (delayed release tablet);
* Triamcinolone acetonide 0.1% (cream).
Drugs with AMP-based FULs that would have been below the average retail
pharmacy acquisition cost:
* Acetaminophen; hydrocodone bitartrate 500mg/15ml; 7.5mg/15ml
(solution);
* Acetaminophen; hydrocodone bitartrate 325mg; 10mg (tablet);
* Alendronate sodium 70mg (tablet);
* Alprazolam 0.25mg (tablet);
* Alprazolam 0.5mg (tablet);
* Alprazolam 1mg (tablet);
* Amlodipine besylate 10mg (tablet);
* Amlodipine besylate 5mg (tablet);
* Amoxicillin; clavulanic acid 600mg/5ml; 42.9mg/5ml (suspension);
* Amoxicillin; clavulanic acid 875mg; 125mg (tablet);
* Azithromycin 100mg/5ml (suspension);
* Azithromycin 200mg/5ml (suspension);
* Azithromycin 250mg (tablet);
* Bupropion hydrochloride 150mg (extended release tablet);
* Bupropion hydrochloride 300mg (extended release tablet);
* Cefdinir 300mg (capsule);
* Clonazepam 0.5mg (tablet);
* Clonazepam 1mg (tablet);
* Cyclobenzaprine hydrochloride 10mg (tablet);
* Desmopressin acetate 0.2mg (tablet);
* Fentanyl 100mcg (film);
* Fentanyl 50mcg/hr (film);
* Fentanyl 75mcg/hr (film);
* Fluoxetine hydrochloride 20mg (capsule);
* Fluticasone propionate 0.05mg (spray);
* Folic acid 1mg (tablet);
* Gabapentin 300mg (capsule);
* Gabapentin 600mg (tablet);
* Gabapentin 800mg (tablet);
* Griseofulvin microcrystalline 125mg/5ml (suspension);
* Hydrochlorothiazide 25mg (tablet);
* Lorazepam 0.5mg (tablet);
* Lorazepam 1mg (tablet);
* Medroxyprogesterone acetate 150mg/ml (injectable).
* Metformin hydrochloride 500mg (tablet);
* Nystatin 100000u/ml (suspension);
* Ofloxacin 0.3% (solution/drops - ophthalmic);
* Ofloxacin 0.3% (solution/drops - otic);
* Omeprazole 20mg (delayed release capsule);
* Oxcarbazepine 300mg (tablet);
* Oxcarbazepine 600mg (tablet);
* Paroxetine hydrochloride 20mg (tablet);
* Phenytoin sodium 100mg extended (capsule);
* Polyethylene glycol 3350 17gm/scoopful (solution);
* Ranitidine hydrochloride 15mg/ml (syrup);
* Ranitidine hydrochloride 150mg (tablet);
* Ribavirin 200mg (capsule);
* Sertraline hydrochloride 100mg (tablet);
* Sertraline hydrochloride 50mg (tablet);
* Simvastatin 20mg (tablet);
* Simvastatin 40mg (tablet);
* Tramadol hydrochloride 50mg (tablet);
* Valproic acid 250mg/5ml (syrup);
* Zolpidem tartrate 10mg (tablet).
Source: GAO analysis of utilization and FUL data from CMS and average
retail pharmacy acquisition cost data from IMS Health.
Notes: Our sample contained 83 multiple-source outpatient prescription
drugs for the second quarter of 2008, which comprised 32 drugs that
were in the top 50 for Medicaid utilization, 34 drugs that were in the
top 50 for Medicaid expenditures, and 17 drugs that were in the top 50
for both utilization and expenditures. Dispensing fees were excluded
when calculating Medicaid expenditures.
The average retail pharmacy acquisition cost data that we obtained from
IMS Health do not account for rebates and discounts that pharmacies may
receive from wholesalers or manufacturers, if they were not included in
invoice prices. We were unable to identify any data sources of these
acquisition costs that account for rebates and discounts.
[End of table]
[End of enclosure]
Enclosure III:
Comparison in the Aggregate of Median AMP-based FULs to Average Retail
Pharmacy Acquisition Costs for 83 Drugs, Second Quarter 2008:
Table 4:
State[A]: Alaska;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 72.3;
Percent of Medicaid utilization represented by 83 drugs: 56.1.
State[A]: Arkansas;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 96.4;
Percent of Medicaid utilization represented by 83 drugs: 57.8.
State[A]: California;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 42.7;
Percent of Medicaid utilization represented by 83 drugs: 54.9.
State[A]: Colorado;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 105.6;
Percent of Medicaid utilization represented by 83 drugs: 55.3.
State[A]: Connecticut;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 94.4;
Percent of Medicaid utilization represented by 83 drugs: 53.9.
State[A]: Delaware;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 64.5;
Percent of Medicaid utilization represented by 83 drugs: 56.6.
State[A]: District Of Columbia;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 71.0;
Percent of Medicaid utilization represented by 83 drugs: 43.9.
State[A]: Florida;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 78.3;
Percent of Medicaid utilization represented by 83 drugs: 52.6.
State[A]: Georgia;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 95.9;
Percent of Medicaid utilization represented by 83 drugs: 47.4.
State[A]: Hawaii;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 98.1;
Percent of Medicaid utilization represented by 83 drugs: 49.5.
State[A]: Idaho;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 86.3;
Percent of Medicaid utilization represented by 83 drugs: 57.3.
State[A]: Illinois;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 104.2;
Percent of Medicaid utilization represented by 83 drugs: 58.1.
State[A]: Indiana;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 94.9;
Percent of Medicaid utilization represented by 83 drugs: 54.2.
State[A]: Iowa;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 64.5;
Percent of Medicaid utilization represented by 83 drugs: 60.1.
State[A]: Kansas;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 100.6;
Percent of Medicaid utilization represented by 83 drugs: 53.7.
State[A]: Kentucky;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 104.1;
Percent of Medicaid utilization represented by 83 drugs: 54.0.
State[A]: Louisiana;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 90.4;
Percent of Medicaid utilization represented by 83 drugs: 54.6.
State[A]: Maine;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 93.5;
Percent of Medicaid utilization represented by 83 drugs: 50.7.
State[A]: Maryland;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 78.5;
Percent of Medicaid utilization represented by 83 drugs: 50.5.
State[A]: Massachusetts;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 112.9;
Percent of Medicaid utilization represented by 83 drugs: 56.7.
State[A]: Michigan;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 107.1;
Percent of Medicaid utilization represented by 83 drugs: 57.9.
State[A]: Minnesota;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 97.8;
Percent of Medicaid utilization represented by 83 drugs: 52.7.
State[A]: Mississippi;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 99.2;
Percent of Medicaid utilization represented by 83 drugs: 53.0.
State[A]: Missouri;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 95.3;
Percent of Medicaid utilization represented by 83 drugs: 46.4.
State[A]: Montana;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 64.6;
Percent of Medicaid utilization represented by 83 drugs: 50.3.
State[A]: Nebraska;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 94.6;
Percent of Medicaid utilization represented by 83 drugs: 62.2.
State[A]: Nevada;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 88.2;
Percent of Medicaid utilization represented by 83 drugs: 53.4.
State[A]: New Hampshire;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 116.8;
Percent of Medicaid utilization represented by 83 drugs: 57.3.
State[A]: New Jersey;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 93.2;
Percent of Medicaid utilization represented by 83 drugs: 53.9.
State[A]: New Mexico;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 99.3;
Percent of Medicaid utilization represented by 83 drugs: 57.2.
State[A]: New York;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 86.8;
Percent of Medicaid utilization represented by 83 drugs: 48.7.
State[A]: North Carolina;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 97.5;
Percent of Medicaid utilization represented by 83 drugs: 58.6.
State[A]: North Dakota;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 97.5;
Percent of Medicaid utilization represented by 83 drugs: 59.6.
State[A]: Ohio;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 78.5;
Percent of Medicaid utilization represented by 83 drugs: 58.4.
State[A]: Oklahoma;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 97.0;
Percent of Medicaid utilization represented by 83 drugs: 56.5.
State[A]: Oregon;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 109.3;
Percent of Medicaid utilization represented by 83 drugs: 51.5.
State[A]: Pennsylvania;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 89.7;
Percent of Medicaid utilization represented by 83 drugs: 56.4.
State[A]: South Carolina;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 85.6;
Percent of Medicaid utilization represented by 83 drugs: 56.7.
State[A]: South Dakota;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 106.7;
Percent of Medicaid utilization represented by 83 drugs: 61.9.
State[A]: Texas;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 92.4;
Percent of Medicaid utilization represented by 83 drugs: 66.4.
State[A]: Utah;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 82.7;
Percent of Medicaid utilization represented by 83 drugs: 59.9.
State[A]: Vermont;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 93.2;
Percent of Medicaid utilization represented by 83 drugs: 52.7.
State[A]: Virginia;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 87.0;
Percent of Medicaid utilization represented by 83 drugs: 57.8.
State[A]: Washington;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 117.6;
Percent of Medicaid utilization represented by 83 drugs: 49.1.
State[A]: West Virginia;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 79.6;
Percent of Medicaid utilization represented by 83 drugs: 56.3.
State[A]: Wisconsin;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 98.3;
Percent of Medicaid utilization represented by 83 drugs: 48.4.
State[A]: Wyoming;
Percentage of acquisition costs[B] that would have been covered by the
AMP-based FUL, in the aggregate, for 83 drugs: 149.1;
Percent of Medicaid utilization represented by 83 drugs: 72.3.
Source: GAO analysis of utilization and FUL data from CMS and average
retail pharmacy acquisition cost data from IMS Health.
Notes:
[A] At the time we requested them from CMS, drug utilization data were
not available for the second quarter of 2008 for Alabama, Arizona,
Rhode Island, and Tennessee, and the U.S. territories of American
Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin
Islands. Because we lacked utilization data for these states and
territories, they have been excluded from our aggregate analyses.
[B] The average retail pharmacy acquisition cost data that we obtained
from IMS Health do not account for rebates and discounts that
pharmacies may receive from wholesalers or manufacturers, if they are
not reflected in invoice prices. We were unable to identify any data
sources of acquisition costs for multiple-source outpatient
prescription drugs that account for rebates and discounts. We used
national pharmacy acquisition costs to conduct this analysis because
acquisition cost data were not available at the state level.
[End of table]
[End of enclosure]
Enclosure IV: Agency Comments:
Department Of Health & Human Services:
Office Of The Secretary:
Assistant Secretary for Legislation:
Washington, DC 20201:
November 10 2009:
John E. Dicken:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street N.W.
Washington, DC 20548:
Dear Mr. Dicken:
Enclosed are comments on the U.S. Government Accountability Office's
(GAO) report entitled: "Medicaid Outpatient Prescription Drugs: 2008
Federal Upper Limits for Reimbursement Compared with Average Retail
Pharmacy Acquisition Costs" (GAO-10-118R).
The Department appreciates the opportunity to review this report before
its publication.
Sincerely,
Signed by:
Andrea Palm:
Acting Assistant Secretary for Legislation:
Enclosure:
[End of letter]
Department Of Health & Human Services:
Centers for Medicare & Medicaid Services:
Administrator:
Washington, DC 20201:
DATE: November 10 2009:
To: Andrea Palm:
Acting Assistant Secretary for Legislation:
Office of the Secretary
From: [Signed by] Charlene Frizzera:
Acting Administrator:
Centers for Medicare & Medicaid Services:
Subject: Government Accountability Office (GAO) Draft Correspondence,
"Medicaid Outpatient Prescription Drugs: 2008 Federal Upper Limits for
Reimbursement Compared with Average Retail Pharmacy Acquisition Costs"
(GAO-10-118R):
Thank you for the opportunity for the Centers for Medicare & Medicaid
Services (CMS) to review and comment on the above-mentioned GAO draft
report. The correspondence examines the relationship between the
average manufacturer price (AMP) based Federal upper limit (FUL)
reimbursement under the Deficit Reduction Act of 2005 (DRA) and what
GAO terms the "average retail pharmacy acquisition costs" for selected
drugs and provides additional information on how the AMP-based FULs
would affect retail pharmacies.
We appreciate the time and effort that went into producing this study.
However, we do not agree with the GAO's findings. We are concerned with
the use of the undiscounted national average retail pharmacy
acquisition cost data that GAO obtained from IMS Health that does not
include discounts and rebates, as well as the methodology GAO used in
its analyses.
The DRA intended to make accurate pricing data transparent to assure
that the Federal government and State Medicaid programs are paying
appropriately for drugs. We believe that as long as States must rely on
drug prices that are not based on verifiable data, reimbursement to
pharmacies will continue to be inflated and the cost to the Medicaid
program will continue to escalate.
CMS Response:
In general, the GAO study stated that the AMP-based FULs for the second
quarter of 2008 would have been lower than the undiscounted average
retail pharmacy acquisition cost for 54 of the 83 drugs in this study.
Since the GAO did not release the data on which the study is based, we
are concerned that GAO may have used incomplete and misleading
information. In addition, we have concerns with the comparison between
data compiled by IMS Health and AMP. The "average retail pharmacy cost"
data compiled by IMS Health does not account for rebates or discounts
that pharmacies receive from manufacturers or wholesalers. Therefore,
comparing undiscounted costs to AMP may not be useful. We believe that
a more thorough analysis of the actual pharmacy acquisition costs is
necessary.
Data Concerns:
Our first significant concern is with GAO's use of the undiscounted
average retail pharmacy acquisition cost data in this analysis.
Undiscounted average retail pharmacy acquisition costs are
not a good proxy for actual pharmacist acquisition costs because they
do not reflect any of the rebates or discounts the pharmacies received
when purchasing these drugs. Although GAO acknowledges the
disadvantages of using an undiscounted average retail pharmacy
acquisition cost, GAO does not account for this overstatement of
pharmacy acquisition cost. Accordingly, we note that such a comparison
to an AMP-based FUL is not a valid price comparison, as AMP is defined
to include all discounts and rebates to the retail pharmacy class of
trade. GAO's comparison would be synonymous with saying that current
State payments for drugs are insufficient because they do not reflect
the reported average wholesale price (AWP) of the drug, a pricing point
known to be inflated and not related to actual pharmacy acquisition
cost. We urge GAO to revise and republish this study using actual
pharmacy acquisition costs to compare to the AMP-based FUL for these
drugs.
We were unsuccessful in obtaining this data or an explanation of how
IMS Health arrived at the undiscounted national average retail pharmacy
acquisition cost used in this report. We were also unsuccessful in
getting GAO to compare the undiscounted average acquisition cost to our
current FULs based on published compendia prices. Nevertheless, we were
able to perform an analysis based on the limited pricing information
provided to CMS from GAO. Our analysis found that even the undiscounted
average retail pharmacy acquisition cost was significantly below the
AWP in almost all cases, and in some cases, equated to more than a 95
percent discount to the AWP. Therefore, if the actual pharmacy
acquisition cost were used in GAO's analysis, we believe it would have
shown prices that were even further discounted compared to the AWP.
Inconsistency with Office of Inspector General Findings:
The Office of Inspector General (OIG) conducted a study of pharmacy
acquisition costs and was able to include pharmacy discounts and
rebates for half of the wholesaler/distributor respondents. Therefore,
we believe that their findings offer a more accurate reflection of the
market. Also, the OIG was able to analyze the lowest pharmacy
acquisition cost. Inasmuch as CMS expects pharmacies to be prudent
buyers and purchase the lowest cost drug rather than the drug with the
highest spread between cost and payment, we also think that the OIG is
a fairer comparison.
In the limited analysis we were able to do, we found the undiscounted
average acquisition costs were significantly higher than the prices
reported by OIG. We were able to match 27 drugs that are on both the
OIG and the GAO sample drug lists. We found that for 19 of the 27 drugs,
GAO's undiscounted average retail pharmacy acquisition costs were
higher than OIG's average acquisition cost, ranging from at least 6
percent to 309 percent higher. While OIG's average acquisition cost
data was from fourth quarter of 2007, CMS does not believe that a
generic drug price would increase 309 percent over a two-quarter
period. If anything, generic drug prices should decrease over time due
to the increase in the number of generic products entering the market
and competition among the generic manufacturers.
Additionally, CMS found that for one product, GAO's undiscounted
average retail pharmacy acquisition cost was 44 percent lower than
OIG's lowest acquisition cost reported. It seems unlikely that GAO's
undiscounted average retail pharmacy acquisition cost should be lower
than OIG's lowest acquisition cost reported. Because of the significant
limitations we identified in GAO's undiscounted average retail pharmacy
acquisition cost data, we strongly urge GAO to revise their study.
Methodology Concerns:
The CMS also has concerns regarding the use of the median AMP-based FUL
for this study. GAO simply used the middle AMP-based FUL value of three
months. This is not an appropriate methodology to evaluate the adequacy
of the monthly AMP-based FUL. If CMS was to provide States with the AMP-
based FUL, it would be done monthly so that States could determine
reimbursement monthly as well. Since each individual month's AMP-based
FUL would be published and used as a reimbursement pricing point, using
the median AMP-based FUL over a three-month period to compare to an
undiscounted average retail pharmacy acquisition cost is not an
accurate depiction of how States would have applied these FULs.
Further Limitations:
The CMS has concerns that GAO's findings do not take into account the
impact of the existing State cost-containment mechanisms such as the
State Maximum Allowable Cost (MAC) programs. While this report notes
that State Medicaid programs consider several methods for reimbursing
pharmacies for multiple-source drugs and that Medicaid typically
reimburses pharmacies at a rate lower than the published FUL, it fails
to evaluate this effect on pharmacy reimbursement. The report should
have also taken into consideration the current State MACs instead of
the just the median AMP-based FULs.
This report only includes 83 drugs in its sample; therefore, it is not
a true reflection of all drug groups subject to the AMP-based FUL. The
average number of AMP-based FUL groups for the second quarter of 2008
was 1,315 groups, which means that the GAO report only reflects about
6.3 percent of the overall AMP-based FUL groups. We believe the
inclusion of these other groups would have altered GAO's findings,
noting that the FUL is calculated in the aggregate and is not based on
an individual drug or on a sampling of drug groups.
Concluding Remarks:
The CMS is aware that the AMP-based FULs fluctuate from month to month
and we are considering measures to ensure that pharmacy reimbursement
is fair and adequate and that all manufacturers report their data
timely. We also note that we may need to otherwise account for these
fluctuations. When we processed the FULs for each of the three months
in the second quarter of 2008, we had monthly AMPs for approximately 81
percent of the National Drug Codes (NDC) in our system reported and
certified by manufacturers. Since that time, we are seeing a
significant increase in the percentage of timely reported and certified
data. However, due to the preliminary injunction issued by the U.S.
District Court for the District of Columbia on December 19, 2007, we
are not able to implement the FULs provisions of the DRA. When we are
able to implement AMP-based FULs, our goal is to have 100 percent of
all the NDCs reported and certified before the FULs are processed. We
also note that when we are able to publicly disclose the AMP data, this
will help bring transparency to drug prices to ensure that pharmacies
know which generic version of the drug can be purchased at less than
the FUL amount.
We again thank GAO for the opportunity to review and comment on this
draft correspondence.
[End of enclosure]
Enclosure V: GAO Contact and Staff Acknowledgments:
GAO Contact:
John E. Dicken, (202) 512-7114 or DickenJ@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, key contributors to this report
were Will Simerl, Assistant Director; Rashmi Agarwal; Karen Howard;
Julian Klazkin; Alexis MacDonald; Daniel Ries; Timothy Walker; and
Michael Zose.
[End of enclosure]
Footnotes:
[1] Medicaid consists of 56 distinct programs created within broad
federal guidelines and administered by state Medicaid agencies. The 56
Medicaid programs include one for each of the 50 states; the District
of Columbia; and the U.S. territories of American Samoa, Guam, Northern
Mariana Islands, Puerto Rico, and the Virgin Islands. In this report,
we use "states" and "state Medicaid programs" to refer to these 56
programs.
[2] Includes $22.3 billion in gross prescription drug expenditures
which are offset by $7.3 billion in drug rebates paid by manufacturers
to state Medicaid programs.
[3] Retail pharmacies are licensed nonwholesale pharmacies that are
open to the public.
[4] The Centers for Medicare and Medicaid Services (CMS)--the agency
that oversees Medicaid--identifies which drugs are subject to FULs.
[5] The drug pricing compendia are published by private companies
including First DataBank, Medi-Span, and Red Book.
[6] Many state Medicaid programs require retail pharmacies to dispense
the lower cost therapeutically equivalent version of a drug to Medicaid
beneficiaries when one is available. Under these mandatory generic
substitution policies, the higher cost version of the drug remains
available to beneficiaries if the prescribing physician receives prior
authorization. In cases when retail pharmacies are authorized to
dispense the higher cost version of the drug, the FUL does not apply.
[7] For the group of drugs subject to FULs, CMS applies FULs at the
aggregate level rather than at the individual drug level when
determining the level of federal payments for a state's Medicaid
prescription drug expenditures. To calculate FULs at the aggregate
level for a state, the FUL for each drug is multiplied by the total
number of units of each drug that were reimbursed by a state Medicaid
program and the total is summed across all drugs subject to FULs.
Therefore, it might be possible for a state Medicaid program to
reimburse pharmacies at an amount above the FULs for certain drugs if
it also reimburses them at an amount below the FULs for other drugs.
[8] Pub. L. No. 109-171, § 6001(a)(2), 120 Stat. 4, 54-55 (2006)
(codified at 42 U.S.C. § 1396r-8(e)(5)).
[9] AMP represents the average of prices paid to manufacturers in the
United States by wholesalers for a drug distributed to the retail
pharmacy class of trade, including independent pharmacies, chain
pharmacies, and mail order pharmacies, and is typically less than any
of a drug's published prices in the three pricing compendia. 42 U.S.C.
§ 1396r-8(k)(1)(A). Under the DRA, manufacturers are required to submit
monthly AMPs no later than 30 days after the end of the prior month.
See 42 U.S.C. § 1396r-8(b)(3)(A)(i); 42 C.F.R. §§ 447.504(a), (e);
447.510(d) (2008). The DRA also provided for CMS to disclose AMP data
to the states and (through an accessible Web site) to the public. 42
U.S.C. § 1396r-8(b)(3)(D)(iv)-(v).
[10] The price a retail pharmacy pays to acquire a drug from a
manufacturer or wholesaler is known as a pharmacy's drug acquisition
cost.
[11] See GAO, Medicaid Outpatient Prescription Drugs: Estimated 2007
Federal Upper Limits for Reimbursement Compared with Retail Pharmacy
Acquisition Costs, [hyperlink, http://www.gao.gov/products/GAO-07-239R]
(Washington, D.C.: Dec. 22, 2006) and HHS OIG, Deficit Reduction Act of
2005: Impact on the Medicaid Federal Upper Limit Program, OEI-03-06-
00400 (Philadelphia, Pa.: June 2007).
[12] 72 Fed. Reg. 39142 (July 17, 2007).
[13] A drug is considered a multiple-source drug when at least one
other drug is therapeutically and pharmaceutically equivalent, as well
as bioequivalent and is generally available to the public through
retail pharmacies within a state. 42 U.S.C. § 1396r-8(k)(7)(A)(i); 42
C.F.R. § 447.502 (2008). Therapeutically equivalent drug products can
be substituted with the full expectation that they will produce the
same clinical effect as the prescribed drug. Under the 2007 final rule,
a multiple-source drug that is available through two or more suppliers
is subject to the FUL.
[14] 42 C.F.R. § 447.514(c)(2)(2008). For example, if there are three
therapeutically equivalent versions of a drug, with AMPs of $.01, $.04,
and $.05, the version with an AMP of $.04 would be used to set the FUL,
because $.01 is less than 40 percent of $.04. This provision applies
only when there are at least three therapeutically equivalent versions
of the drug available.
[15] 42 C.F.R. § 447.510(d)(2008). Consistent with the DRA, the final
rule also stated that FULs would be established for multiple-source
drugs for which there were at least two therapeutically and
pharmaceutically equivalent products. Previously, FULs were required
only when there were at least three such products. 42 U.S.C. 1396r-
8(e)(4); 42 C.F.R. § 447.514(a)(2008).
[16] Pub. L. No. 110-275, § 203, 122 Stat. 2494, 2592 (2008).
[17] Pending legislation would require changes to the calculation of
AMP-based FULs. See, e.g., H.R. 3962, 111th Cong. § 1741 (2009).
[18] The second quarter of 2008 was the most recent quarter for which
most states had reported their utilization data to CMS at the time we
began our analysis.
[19] Throughout this report, "AMP-based FULs" refer to what the FULs
would have been if they had been calculated using 250 percent of the
AMP, as specified in the DRA.
[20] Medicaid utilization data reported to CMS include information on
the dollar amount and total number of units for which state Medicaid
programs reimbursed retail pharmacies for covered drugs dispensed to
Medicaid beneficiaries. As of July 2009, when we selected our sample,
utilization data from Alabama, Arizona, Rhode Island, and Tennessee,
and the U.S. territories of American Samoa, Guam, Northern Mariana
Islands, Puerto Rico, and the Virgin Islands were not available.
Therefore, our analysis is limited to 46 states and the District of
Columbia.
[21] We calculated the median FUL for the second quarter of 2008 from
the 3 months of FUL data provided by CMS in order to compare the
quarterly FUL data to the quarterly average pharmacy acquisition cost
data.
[22] For any given therapeutically equivalent version of a drug, the
actual acquisition costs of individual retail pharmacies may be higher
or lower than the national average we obtained from IMS Health.
[23] These discounts and rebates may vary, as retail pharmacies
negotiate them based on various factors, including the type of drug,
manufacturer, and volume of purchases. In addition, retail pharmacies
can negotiate rebates on a manufacturer's entire line of products
rather than per drug. We were unable to identify any data sources of
acquisition costs for multiple-source outpatient prescription drugs
that account for these reductions in the cost of drugs to retail
pharmacies.
[24] The average retail pharmacy acquisition costs we used do not
account for rebates and discounts that pharmacies may receive from
wholesalers or manufacturers. We were unable to identify any data
sources for these acquisition costs that account for rebates and
discounts.
[25] Within guidelines established by federal statutes, regulations,
and policies, each state (1) establishes its own eligibility standards;
(2) determines the type, amount, duration, and scope of services; (3)
sets the rate of payment for services; and (4) administers its own
program.
[26] 52 Fed. Reg. 28648 (July 31, 1987). Legislation was enacted in
1990 requiring the application of FULs. Pub. L. No. 101-508, §
4401(a)(3), 104 Stat. 1388, 1388-143, 151 (1990).
[27] AWP is the average of the list prices that the manufacturer
suggests wholesalers charge pharmacies. WAC is the manufacturer's list
price for wholesalers or other direct purchasers before any rebates,
discounts, allowances, or other price concessions. DP as published by
First DataBank represents the manufacturer's published catalog or list
price for a drug product to nonwholesalers. DP does not represent
actual transaction prices and does not include prompt pay or other
discounts, rebates, or reductions.
[28] The usual and customary charge for a drug is the full retail price
that individuals without prescription drug coverage pay when purchasing
drugs at a retail pharmacy.
[29] States that administer MACs publish lists of selected multiple-
source drugs with the maximum price at which the state will reimburse
for those medications. Pharmacies generally do not receive payments
that are higher than the MAC price. The MAC lists differ from the FUL
list, as states have more discretion in determining what drugs to
include on their MAC lists. Generally, state MAC lists include more
drugs and establish lower reimbursement prices than the FUL list. As of
June 2009, 45 states administer MACs.
[30] Under the Medicaid drug rebate program, pharmaceutical
manufacturers pay rebates to states for the drugs they purchase as a
condition of participating in the state programs.
[31] At the time we requested them from CMS, drug utilization data were
not available for the second quarter of 2008 for Alabama, Arizona,
Rhode Island, and Tennessee, and the U.S. territories of American
Samoa, Guam, Northern Mariana Islands, Puerto Rico, and the Virgin
Islands. Because we lacked utilization data for these states and
territories, they have been excluded from our aggregate analyses.
[32] 42 C.F.R. § 447.514(c)(2)(2008). Under the outlier provision, if
the lowest AMP is less than 40 percent of the second-lowest AMP, CMS
uses the second-lowest AMP for a multiple-source drug to calculate the
AMP-based FUL. The outlier provision only applies to multiple-source
drugs with three or more therapeutically equivalent versions.
[33] While the average amount of rebates for pharmacies is unknown,
rebates in other parts of the pharmaceutical industry are considerably
less than 17 percent. For example, in a 2003 report, we found that the
range of rebates paid by pharmacy benefit managers to three health
plans participating in the Federal Employees' Health Benefit Program
ranged from 3 to 9 percent. See GAO, Federal Employees' Health
Benefits: Effects of Using Pharmacy Benefits Managers on Health Plans,
Enrollees, and Pharmacies, [hyperlink,
http://www.gao.gov/products/GAO-03-196] (Washington, D.C.: Jan. 10,
2003). In addition, the statutory rebate for drug manufacturers to
reimburse state Medicaid programs for generic drugs is 11 percent of
AMP.
[34] We reviewed this report and discussed it with OIG officials.
However, we did not evaluate the OIG's data sources.
[35] Entities may be reluctant to disclose drug pricing data, because
doing so may place them at a competitive disadvantage.
[36] We used average retail pharmacy acquisition cost data from the
first quarter of 2006 for this analysis because our previous report
comparing AMP-based FULs to average retail pharmacy acquisition costs
was based on data from that quarter. See GAO, Medicaid Outpatient
Prescription Drugs: Estimated 2007 Federal Upper Limits for
Reimbursement Compared with Retail Pharmacy Acquisition Costs,
[hyperlink, http://www.gao.gov/products/GAO-07-239R] (Washington, D.C.:
Dec. 22, 2006).
[37] For example, a 2007 HHS-OIG report found that for 23 out of 25
selected drugs, FULs that are based on published prices were more than
double the average pharmacy acquisition costs. See, HHS OIG, Deficit
Reduction Act of 2005: Impact on the Medicaid Federal Upper Limit
Program, OEI-03-06-00400 (Philadelphia, Pa.: June 2007).
[End of section]
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