[Federal Register: October 22, 2008 (Volume 73, Number 205)]
[Notices]
[Page 62997-62999]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22oc08-72]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS)
Centers for Medicare & Medicaid Services
Notice of Hearing: Reconsideration of Disapproval of Arkansas
State Plan Amendment (SPA) 07-024
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice of hearing.
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SUMMARY: This notice announces an administrative hearing to be held on
December 9, 2008, at the CMS Dallas Regional Office, 1301 Young Street,
Suite 833, Room 1196, Dallas, Texas 75202, to reconsider CMS' decision
to disapprove Arkansas SPA 07-024.
CLOSING DATE: Requests to participate in the hearing as a party must be
received by the presiding officer by November 6, 2008.
FOR FURTHER INFORMATION CONTACT: Benjamin Cohen, Presiding Officer,
CMS, 2520 Lord Baltimore Drive, Suite L, Baltimore, Maryland 21244,
Telephone: (410) 786-3169.
SUPPLEMENTARY INFORMATION:
This notice announces an administrative hearing to reconsider CMS'
decision to disapprove Arkansas SPA 07-024 which was submitted on
[[Page 62998]]
January 18, 2008, and disapproved on August 19, 2008.
Under this SPA, the State would increase the dispensing fee from
$5.51 to $8.68 for brand name prescription drugs. The dispensing fee
for generic drugs would increase to $11.68, an increase from $5.51 for
drugs with a maximum allowable cost (MAC) limit and from $7.51 for
drugs without a MAC limit. The dispensing fee for generic drugs would
be further increased to $12.68 if there is a 2.3 percent increase in
the proportion of total claims dispensed as generic drugs. CMS was
unable to approve this SPA because it does not comply with section
1902(a)(30)(A) of the Social Security Act (the Act) and the
longstanding requirements of Federal regulations (previously codified
at 42 CFR 447.331 and at 42 CFR 447.332), which specify that the State
must have a reasonable dispensing fee.
Section 1902(a)(30)(A) of the Act requires that States have methods
and procedures to assure that payment rates are consistent with
efficiency, economy, and quality of care. Section 1902(a)(30)(A) and
longstanding requirements of Federal regulations (previously codified
at 42 CFR 447.331 and 42 CFR 447.332) provide that payments for drugs
are to be based on the ingredient cost of the drug and a reasonable
dispensing fee.
In support of its proposal, the State submitted survey findings
dated February 2, 2007, performed by MENTORx that show the median
dispensing cost is $9.25 for all pharmacies with a spread of $4.44
between the 20th percentile value ($7.45) and the 80th percentile value
($11.89). The study looked at the difference in dispensing costs
between independent and chain pharmacies, but not between brand and
generic drugs.
The hearing will involve the following issues:
The MENTORx survey failed to present supporting evidence
for the State's determination of separate dispensing fees for brand and
generic prescriptions and the State has failed to provide us with
sufficient evidence to demonstrate that the separate dispensing fee for
brand name and generic prescription drugs is reasonable.
MENTORx recommended the 80th percentile ($11.89) be used
as the dispensing fee for all prescriptions. While the State did not
follow this recommendation, it did not adequately explain why it chose
the dispensing fee for brand name drugs based on the 40th percentile
value ($8.68) and the initial dispensing fee for generics based
slightly below the 80th percentile value ($11.89). The State's current
dispensing fee of $5.51 is one of the highest in the Nation among State
Medicaid programs. The proposed dispensing fee for generic drugs would
be the highest in the Nation among State Medicaid programs and would be
the largest variance in dispensing fees between brand and generic
drugs. Accordingly, the State failed to adequately explain why a
dispensing fee slightly below the 80th percentile value would not
result in most pharmacies being overpaid to dispense generic drugs.
Therefore, CMS did not believe that the State demonstrated why this is
reasonable.
Despite the fact that the generic dispensing fee was set
at the maximum cost in the survey, the State did not adequately explain
why it would further increase the generic fee above the 80th percentile
to $12.68. While the State claimed that increasing the dispensing fee
would be budget neutral based on a 2.3 percent increase in the
proportion of total claims dispensed as generic drugs, it did not
explain why a further incentive from the current $2 differential to a
$4 differential was reasonable.
In response to our formal concerns, the State indicated
that data do not exist to differentiate dispensing cost of brand versus
generic drugs. The State indicated that the intent of the proposed
dispensing fee is to encourage the use of less costly generics, and
thus avoid the higher ingredient reimbursement of a brand. However, the
State failed to consider the ingredient cost of drugs as well as the
cost of dispensing, to ensure that both are being paid appropriately.
To increase the dispensing fee without considering the ingredient cost
payment so that it accurately estimates acquisition cost results in an
overall payment that is inconsistent with the requirement of the
statute that payments be consistent with efficiency and economy.
Section 1116 of the Act and Federal regulations at 42 CFR Part 430,
establish Department procedures that provide an administrative hearing
for reconsideration of a disapproval of a State plan or plan amendment.
CMS is required to publish a copy of the notice to a State Medicaid
agency that informs the agency of the time and place of the hearing,
and the issues to be considered. If we subsequently notify the agency
of additional issues that will be considered at the hearing, we will
also publish that notice.
Any individual or group that wants to participate in the hearing as
a party must petition the presiding officer within 15 days after
publication of this notice, in accordance with the requirements
contained at 42 CFR 430.76(b)(2). Any interested person or organization
that wants to participate as amicus curiae must petition the presiding
officer before the hearing begins in accordance with the requirements
contained at 42 CFR 430.76(c). If the hearing is later rescheduled, the
presiding officer will notify all participants.
The notice to Arkansas announcing an administrative hearing to
reconsider the disapproval of its SPA reads as follows:
Mr. Breck Hopkins, Chief Counsel, Arkansas Department of Human
Services, P.O. Box 1437, Slot S-260, Little Rock, AR 72203-1437.
Dear Mr. Hopkins: I am responding to your request for
reconsideration of the decision to disapprove the Arkansas State
plan amendment (SPA) 07-024, which was submitted on January 18,
2008, and disapproved on August 19, 2008.
Under this SPA, the State proposed to increase the dispensing
fee from $5.51 to $8.68 for brand name prescription drugs. The
dispensing fee for generic drugs would increase to $11.68, an
increase from $5.51 for drugs with a maximum allowable cost (MAC)
limit and from $7.51 for drugs without a MAC limit. The dispensing
fee for generic drugs would be further increased to $12.68 if there
is a 2.3 percent increase in the proportion of total claims
dispensed as generic drugs. I was unable to approve this SPA because
it does not comply with section 1902(a)(30)(A) of the Social
Security Act (the Act) and the longstanding requirements of Federal
regulations (previously codified at 42 CFR 447.331 and at 42 CFR
447.332), which specify that the State must have a reasonable
dispensing fee.
Section 1902(a)(30)(A) of the Act requires that States have
methods and procedures to assure that payment rates are consistent
with efficiency, economy, and quality of care. Section
1902(a)(30)(A) and longstanding requirements of Federal regulations
(previously codified at 42 CFR 447.331 and 42 CFR 447.332) provide
that payments for drugs are to be based on the ingredient cost of
the drug and a reasonable dispensing fee.
In support of its proposal, the State submitted survey findings
dated February 2, 2007, performed by MENTORx that show the median
dispensing cost is $9.25 for all pharmacies with a spread of $4.44
between the 20th percentile value ($7.45) and the 80th percentile
value ($11.89). The study looked at the difference in dispensing
costs between independent and chain pharmacies, but not between
brand and generic drugs.
The hearing will involve the following issues:
The MENTORx survey failed to present supporting
evidence for the State's determination of separate dispensing fees
for brand and generic prescriptions and the State has failed to
provide us with sufficient evidence to demonstrate that the separate
dispensing fee for brand name and generic prescription drugs is
reasonable.
MENTORx recommended the 80th percentile ($11.89) be
used as the dispensing
[[Page 62999]]
fee for all prescriptions. While the State did not follow this
recommendation, it did not adequately explain why it chose the
dispensing fee for brand name drugs based on the 40th percentile
value ($8.68) and the initial dispensing fee for generics based
slightly below the 80th percentile value ($11.89). The State's
current dispensing fee of $5.51 is one of the highest in the Nation
among State Medicaid programs. The proposed dispensing fee for
generic drugs would be the highest in the Nation among State
Medicaid programs and would be the largest variance in dispensing
fees between brand and generic drugs. Accordingly, the State failed
to adequately explain why a dispensing fee slightly below the 80th
percentile value would not result in most pharmacies being overpaid
to dispense generic drugs. Therefore, we do not believe that the
State has demonstrated why this is reasonable.
Despite the fact that the generic dispensing fee was
set at the maximum cost in the survey, the State did not adequately
explain why it would further increase the generic fee above the 80th
percentile to $12.68. While the State claimed that increasing the
dispensing fee would be budget neutral based on a 2.3 percent
increase in the proportion of total claims dispensed as generic
drugs, it did not explain why a further incentive from the current
$2 differential to a $4 differential was reasonable.
In response to our formal concerns, the State indicated
that data do not exist to differentiate dispensing cost of brand
versus generic drugs. The State indicated that the intent of the
proposed dispensing fee is to encourage the use of less costly
generics, and thus avoid the higher ingredient reimbursement of a
brand. However, the State failed to consider the ingredient cost of
drugs as well as the cost of dispensing, to ensure that both are
being paid appropriately. To increase the dispensing fee without
considering the ingredient cost payment so that it accurately
estimates acquisition cost results in an overall payment that is
inconsistent with the requirement of the statute that payments be
consistent with efficiency and economy.
I am scheduling a hearing on your request for reconsideration to
be held on December 9, 2008, at the CMS Dallas Regional Office, 1301
Young Street, Suite 833, Room 1196, Dallas, Texas 75202, in order to
reconsider the decision to disapprove SPA 07-024. If this date is
not acceptable, we would be glad to set another date that is
mutually agreeable to the parties. The hearing will be governed by
the procedures prescribed by Federal regulations at 42 CFR Part 430.
I am designating Mr. Benjamin Cohen as the presiding officer. If
these arrangements present any problems, please contact the
presiding officer at (410) 786-3169. In order to facilitate any
communication which may be necessary between the parties to the
hearing, please notify the presiding officer to indicate
acceptability of the hearing date that has been scheduled and
provide names of the individuals who will represent the State at the
hearing.
Sincerely,
Kerry Weems,
Acting Administrator.
Section 1116 of the Social Security Act (42 U.S.C. 1316; 42 CFR
430.18)
(Catalog of Federal Domestic Assistance program No. 13.714, Medicaid
Assistance Program.)
Dated: October 16, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. E8-25196 Filed 10-22-08; 8:45 am]
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