GAO: Medicaid pharmacies will be paid one-third less than retailers

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The federal government will be paying pharmacies 36% less than it cost retailers to acquire many generic drugs, under a new reimbursement methodology for the Medicaid program, the Government Accountability Office found.

The GAO determined that average manufacturer price-based reimbursements would be lower than the average retail pharmacy acquisitions for 59 of the 77 drugs in the sample, which was taken during the first quarter of 2006. The methodology, which took effect Jan. 1, was a product of the Deficit Reduction Act of 2005.

CMS, which issued a proposed rule on the reimbursement calculation in December, will issue a final rule by July 1. Independent pharmacies asserted the proposed rule's cuts to reimbursement rates would force drugstores to operate at a $3 to $4 loss per affected generic dispensed under the Medicaid program and would inhibit the use of generics. Medicaid spending on outpatient medication has risen sharply over the last decade.

See GAO's correspondence at http://www.gao.gov/new.items/d07239r.pdf .