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GAO-11-141R 1 (2010-12-15)

handle is hein.gao/gaobaanvv0001 and id is 1 raw text is: i ~G AO0 Accountability I Integrity * Reliability United States Government Accountability Office Washington, DC 20548 December 15, 2010 The Honorable Henry A. Waxman Chairman Committee on Energy and Commerce House of Representatives Subject: Medicaid Outpatient Prescription Drugs: Estimated Changes to Federal Upper Limits Using the Formula under the Patient Protection and Affordable Care Act Dear Mr. Chairman: Spending on prescription drugs in Medicaid-the joint federal-state program that finances medical services for certain low-income adults and children-totaled $15.2 billion in fiscal year 2008.1 State Medicaid programs do not directly purchase prescription drugs; instead, they reimburse retail pharmacies for covered prescription drugs dispensed to Medicaid beneficiaries. The federal government provides matching funds to state Medicaid programs to help cover a portion of the cost of these reimbursements.2 For certain outpatient prescription drugs for which there are three or more therapeutically equivalent versions,3 state Medicaid programs may only receive federal matching funds for reimbursements up to a maximum amount, which is known as a federal upper limit (FUL). FULs were designed as a cost-containment strategy and have historically been calculated as 150 percent of the lowest published price for the therapeutically equivalent versions of a given drug from among the prices published nationally in three drug pricing compendia. The prices from these compendia are list prices suggested by drug manufacturers and do not reflect actual transaction prices. State Medicaid programs have the authority to determine their own reimbursement amounts to retail pharmacies for covered prescription drugs. However, for drugs subject to a FUL, the federal government will only provide matching funds to the extent that a state's annual reimbursements do not exceed the sum of the FULs 'Medicaid spent $23.6 billion on prescription drugs in 2008, however this amount was offset by $8.4 billion in drug rebates paid by manufacturers to state Medicaid programs. Medicaid officials told us they could not report how much of this total Medicaid prescription drug spending was specifically for outpatient drugs. 2The portion of the cost paid by the federal government varies from state to state. 3Drugs determined by the Food and Drug Administration to be therapeutically equivalent can be substituted with the full expectation that they will produce the same clinical effect and safety profile as each other. They must contain the same active ingredient(s) and have the same dosage form, route of administration, and strength. GAO-11-141R Medicaid Outpatient Prescription Drugs

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