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GAO-07-239R 1 (2006-12-22)

handle is hein.gao/gaocrptatxy0001 and id is 1 raw text is: Sai Accountability * Integrity * Reliability United States Government Accountability Office Washington, DC 20548 December 22, 2006 The Honorable Joe Barton Chairman Committee on Energy and Commerce House of Representatives Subject: Medicaid Outpatient Prescription Drugs: Estimated 2007 Federal Upper Limits for Reimbursement Compared with Retail Pharmacy Acquisition Costs Dear Mr. Chairman: Spending on outpatient prescription drugs in Medicaid-the joint federal-state program that finances medical services for certain low-income adults and children- has accounted for a substantial and growing share of Medicaid expenditures.' Medicaid's total spending on outpatient prescription drugs grew from $4.6 billion in fiscal year 1990 to $40 billion in fiscal year 2004-or from 7.0 to 14.2 percent of Medicaid's total expenditures for medical care. State Medicaid programs do not directly purchase prescription drugs; instead, they reimburse retail pharmacies for covered outpatient prescription drugs dispensed to Medicaid beneficiaries.2 For some outpatient multiple-source prescription drugs, state Medicaid programs may only receive federal matching funds for reimbursements up to a maximum amount known as a federal upper limit (FUL).3'4 Required by law as a cost-containment strategy, FULs are calculated as 150 percent of the lowest price for a drug, from among the 'Medicaid consists of 56 distinct programs created within broad federal guidelines and administered by state Medicaid agencies. The 56 Medicaid programs include one for each of the 50 states; the District of Columbia; Puerto Rico; and the U.S. territories of American Samoa, Guam, Northern Mariana Islands, and the Virgin Islands. Hereafter in this report, we use state Medicaid programs to refer to these 56 programs. 2Retail pharmacies are licensed nonwholesale pharmacies that are open to the public. 3FULs must be established for each multiple source drug for which there are three or more therapeutically equivalent drug products. 42 U.S.C. § 1396r-8(e)(4) (2000). Therapeutically equivalent drug products can be substituted with the full expectation that they will produce the same clinical effect as the prescribed drug. 4By regulation, FULs apply to multiple-source prescription drugs that the Food and Drug Administration considers to have at least three therapeutically equivalent versions and at least three manufacturers or suppliers. 42 C.F.R. § 447.301 and 447.332 (2005). GAO-07-239R Medicaid Federal Upper Limits

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