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GAO-06-69R 1 (2005-10-31)

handle is hein.gao/gaocrptasjw0001 and id is 1 raw text is: Sai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 October 31, 2005 The Honorable Edward Whitfield Chairman Subcommittee on Oversight and Investigations Committee on Energy and Commerce House of Representatives Subject: Medicaid: States' Payments for Outpatient Prescription Drugs Dear Mr. Chairman: Spending on outpatient prescription drug coverage for Medicaid beneficiaries has accounted for a substantial and growing share of Medicaid program expenditures. All states and the District of Columbia have elected to include outpatient prescription drug coverage as a benefit of their Medicaid programs. Total Medicaid expenditures on outpatient prescription drugs grew from $4.6 billion (nearly 7 percent of Medicaid's total medical care expenditures) in fiscal year 1990 to $33.8 billion (13 percent of Medicaid's total medical care expenditures) in fiscal year 2003. This represented more than twice the rate of increase in total Medicaid spending from fiscal year 1990 through fiscal year 2003. Amid concerns about increasing Medicaid drug spending, focus has been drawn to the ways states pay for prescription drugs. State Medicaid programs pay pharmacies for covered outpatient prescription drugs dispensed to Medicaid beneficiaries. The Centers for Medicare & Medicaid Services (CMS)-the agency of the Department of Health and Human Services (HHS) that oversees states' Medicaid programs-sets maximum payment limits for certain drugs-federal upper limits (FUL)2-and provides guidelines regarding drug payment, as defined by regulation. Within these parameters, states may determine their own drug payment methodologies. States are to pay pharmacies the lower of the state's estimate of the drug's acquisition cost to the pharmacy, plus a dispensing fee, or the 'Medicaid is a joint federal-state program that finances health insurance for certain low-income adults and children. 2See 42 C.F.R. § 447.332 (2004). Federal regulations require CMS to set specific FUL amounts for certain multiple-source drugs that are provided by at least three suppliers. A multiple-source drug is a drug that is either marketed or sold by two or more manufacturers or labelers, or marketed or sold by the same manufacturer or labeler under two or more different proprietary names or both under a proprietary name and without such a name. Payments for these drugs must not exceed, in the aggregate, a reasonable dispensing fee plus an amount that equals 150 percent of the lowest published price of the drug listed in national pricing compendia. 3See 42 C.F.R. § 447.331 (2004). GAO-06-69R States' Medicaid Payments for Prescription Drugs

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