CMS revokes Medicaid generic drug payment rule

NEWS IN BRIEF — Posted Dec. 13, 2010

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The Centers for Medicare & Medicaid Services on Nov. 15 rescinded a July 2007 final rule lowering Medicaid reimbursement to pharmacists for dispensing generic drugs.

The 2007 rule -- a Deficit Reduction Act of 2005 requirement -- would have reduced the amount Medicaid paid for many generic Medicaid drugs to less than what the drugs cost pharmacists, according to a 2006 Government Accountability Office report. During the George W. Bush administration, CMS disagreed with that conclusion, saying the GAO report did not account for other provisions in the act that would mitigate the rule's impact. However, the rule's implementation was blocked by a 2007 federal court decision that found it inconsistent with Medicaid law. In addition, an act of Congress in 2008 blocked the rule.

The final blow came in the national health reform law, which lessened cuts of Medicaid reimbursement to pharmacists' for dispending generic drugs through a formula known as average manufacturer's price.

The National Assn. of Chain Drug Stores and National Community Pharmacists Assn. praised the CMS action in a joint statement. "The end result is not an increase in reimbursement to pharmacy, but rather the lessening of cuts that previously would have involved pharmacies selling most generic drugs at a loss, thereby threatening their long-term ability to provide patient care and access."

Note: This item originally appeared at

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