Pharmacists urge Congress not to end Medicaid rebates

Drug Store News, Oct 9, 1995

WASHINGTON, D.C. - Efforts by Senate Republicans to "sunset" OBRA '90's requirement for Medicaid rebates from drug manufacturers could reduce the quality of care to the poor and rattle the "economic foundation" of retail pharmacy, drug store industry representatives warned Congress.

In a joint letter to members of the Senate Finance and House Commerce Committees, National Association of Chain Drug Stores (NACDs) president Ronald L. Ziegler and NARD executive vice president Charles M. West noted that the rebates which manufacturers pay in return for making their multi-source drugs available to Medicaid patients have saved state programs more than $5 billion.

But under a plan approved by Senate Republicans in late September, the requirement for these rebates would be cut from the law in three years - a change that would cost state Medicaid programs $6.9 billion, NACDS officials told Drug Store News.

No similar rebate "sunset" provision was included in the Medicaid reform legislation passed by the House, and retail pharmacy leaders are hoping to have the Senate language stripped from the final version of the bill.

"States cannot afford to lose this revenue as they attempt to provide quality health care services for low income and nursing home populations," Ziegler and West said in their letter.

Rebates contain costs

At the same time, they argued that the rebate requirement assures that drug manufacturers contribute to Medicaid cost containment, and that all pressure to lower program costs is not targeted at pharmacists.

"Prior to enactment of the rebate program, state Medicaid drug programs focused most of their cost management on reducing reimbursement to community pharmacies," NACDS and NARD said. "This approach did little to control overall program costs" because the "primary reason" for soaring Medicaid drug expenditures was the 88 percent jump in manufacturer drug prices from 1983 to 1993.

Reimbursement cut?

"Without the option of the rebate program, states once again might focus on reducing pharmacy reimbursement to make up for the millions of dollars in rebates that they have been collecting from manufacturers," the two groups said.

Any additional cuts in Medicaid reimbursement to pharmacists "would further erode pharmacy's already declining economic foundation," Ziegler and West wrote.

The drug store industry's arguments are striking a receptive chord among Congressmen from large states. Just last month members of both the New York and Texas Congressional delegations openly urged House Commerce Committee Chairman Thomas Bliley (R-VA) to permit states to continue collecting such rebates even if Medicaid is converted to a "block grant" program.