WASHINGTON, DC – U.S. Senator Pat Roberts (R-KS) and Senator Ken Salazar (D-CO) today led a strong bipartisan effort to send a letter to the Centers for Medicare and Medicaid Services (CMS) on behalf of community and retail pharmacists to address a recently proposed rule which threatens to restrict access to prescription drugs for millions of Medicaid beneficiaries.

"American families rely on their pharmacists, and this short-sighted proposal will create significant economic hardships for our local pharmacies, which ultimately threatens patient access to their needed drugs," Senator Roberts said. "This rule particularly affects rural areas, and I am taking a stand against it to help our Kansas pharmacists."

The following is the text of the letter signed by Senators Roberts, Salazar, and 44 other Senators sent to CMS Acting Administrator Leslie Norwalk:

"We write to express deep concern that a recently proposed Centers for Medicare and Medicaid Services’ (CMS) rule regarding prescription drug pharmacy reimbursement in the Medicaid program will threaten the existence of retail pharmacies and severely restrict the ability of millions of Medicaid beneficiaries to access prescription drugs from pharmacies.

"As you are aware, the Deficit Reduction Act of 2005 (DRA) required that CMS post and use average manufacturer price (AMP) data to set reimbursement for generic drugs as a benchmark for states to use in reimbursing retail pharmacies. In the DRA, Congress intended CMS to promulgate a rule that would more clearly define (AMP). In our view, this definition should closely approximate the costs incurred by retail pharmacies to purchase drugs. Rather than providing clarity or an accurate reflection of retail pharmacy drug costs, the proposed rule threatens retail pharmacies and beneficiary access to critical medications.

"The proposed rule creates economic hardships for retail pharmacies and threatens beneficiary access to prescription drugs by including in the AMP manufacturers’ sales to non retail pharmacies, such as mail order sales and pharmacy benefit manager rebates. Mail order facilities, which are almost exclusively operated by pharmacy benefit managers, are extended special drug prices that are not available to the traditional brick and mortar community pharmacies that actually dispense medications to Medicaid recipients. Similarly, retail community pharmacies do not receive pharmacy benefit manager rebates or discounts. Inclusion of mail order pharmacy sales and pharmacy benefit manager rebates in the calculation of AMP will only serve to reduce pharmacy reimbursement to rates below their actual acquisition costs. As a consequence, pharmacies that serve Medicaid beneficiaries, especially pharmacies in rural communities, may be forced to close their doors. Rural pharmacies are not just small businesses that employ rural residents, pay taxes and give generously to their communities. They are also the cornerstone of the fragile health care delivery system in rural towns and communities across our nation. If they go out of business, the economy and the health of thousands of residents will suffer.

"The proposed rule also undermines beneficiary access to generic medications from retail pharmacies by basing the Federal Upper Limit (FUL) for generic drugs on 250% of the product that has the lowest AMP for all of the versions of that generic medication. A recent Government Accountability Office report that analyzed the impact of the proposed FUL formula found that retail pharmacies will be reimbursed on average 36 percent lower than the actual cost they incur in purchasing generic drugs dispensed to Medicaid beneficiaries. The proposed rule, therefore, requires pharmacies to shoulder significant economic losses for participating in the Medicaid program. Clearly, pharmacies can not be expected to serve Medicaid beneficiaries when it disadvantages them economically. Moreover, the rule creates a disincentive for pharmacies to dispense cost-saving generic drugs, which save the Medicaid program and beneficiaries significant resources.

"Finally, we understand that CMS intends to release AMP data in the next few weeks. As you know, CMS delayed the release of AMP data last July because of inconsistencies and inaccuracies in the manner in which manufacturers calculated AMP. In doing so, CMS acknowledged the significant disruptions in the Medicaid program, pharmacy operations and broader pharmaceutical market that would occur with the release of unreliable AMP data. The release of AMP data in the next few weeks, poses the same dangers to pharmacies, Medicaid beneficiaries and the pharmaceutical market. Moreover, CMS will not have published the final rule defining AMP until July 2007. We believe that CMS should again delay the release of AMP data until it completes its rulemaking process and until AMP is calculated based on a uniform and valid definition used by all manufacturers.

"The proposed rule will have a devastating impact on retail pharmacies, beneficiary access to critical medications and the Medicaid program. We request that CMS revise the proposed rule to equitably reimburse pharmacies, protect beneficiary access to drugs necessary to maintain their health, and create incentives for cost-saving, generic drug usage."

Senator Roberts is a senior member of the Senate Health, Education, Labor and Pensions (HELP) Committee and a new member of the Senate Finance Committee.