State Medicaid programs would be financially penalized if they fail to reach target levels of generic dispensing for multiple-source drugs, under Reps. Nancy Boyda, D-Kan., and Jo Ann Emerson's, R-Mo., legislation to overturn the average manufacturer price system.

Their bill, H.R. 3140, replaces AMPs with retail acquisition costs in an effort to have the Medicaid policy more accurately reflect pharmacy expenses (see ¹ Also see "Medicaid AMPs Would Be Replaced By Pharmacy Acquistion Cost - House Bill" - Pink Sheet, 30 July, 2007.).

The AMP system is designed in part to promote generic utilization by setting federal payment limits at 250 percent of the lowest AMP for products in a multi-source group.

The legislators propose a different twist: reducing federal shares of Medicaid spending if generic utilization falls below certain rates.

Specifically, federal payment to a state could be reduced if generic dispensing does not meet a target level, defined in the bill as the lesser of:

65 percent

at least 1 percentage point above the state's rate for the previous year or, for those states below the national average, 3 points above their rate for the previous year.

Payments could be reduced by what would have been the added savings had the target been achieved.

The generic dispensing rate "means, with respect to a multiple source drug, the proportion of the total volume of such drugs dispensed that are generic drugs."

The National Association of Community Pharmacists recently estimated that generics account for 55 percent of all Medicaid scripts; the calculation did not appear limited to products available in multiple source versions (² Also see "Medicaid AMPs Will Cut Average Pharmacy Revenue By Only 1 Percent – CMS" - Pink Sheet, 23 July, 2007., p. 25).

In February, CMS reported that the aggregate generic use rate for Medicare prescription drug plans was 59 percent in third quarter 2006, with WellCare achieving the highest rate, 67 percent.

- Denise Peterson (d.peterson@elsevier.com)

Medicaid Generic Dispensing Target Of 65% Proposed In Boyda/Emerson Bill

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