Monday, December 17, 2007

No AMP for You!

Well, pierce my ears, and call me drafty!

On Friday, U.S. District Court Judge Royce Lamberth granted an injunction that will prevent CMS from adopting the AMP-based reimbursement formula for generic prescriptions in Medicaid until he has reportedly “had an opportunity to fully review the new payment plan.” CMS will also not be permitted to post Average Manufacturer Price (AMP) data on the Internet as planned.

The injunction stemmed from a lawsuit brought by NACDS and NCPA against CMS. (See the NCPA’s Legal Proceedings page for links to the case documents.) In Analysis of AMP Lawsuit Odds last month, I incorrectly predicted that the injunction would not be granted. (Thanks a lot, Arnie Becker!) Naturally, I will be happy to refund your subscription fee to Drug Channels.

Here are some initial reactions to the injunction:

CMS was over confident. One interesting revelation from this lawsuit was the fact that CMS intended to publish the AMP data in “mid-December.” The comment period for a related portion of the AMP rule closes on January 2, 2008, leaving very limited time for detailed challenges or data analyses. Last week, I attended a conference in which one speaker (a DC lawyer) said: “CMS feels very strongly that what they’ve done is correct.” Their Memorandum of Opposition did not even bother to rebut the marketplace impacts outlined in the expert report submitted by NACDS and NCPA.

Pharmacy lobbyists won the PR battle. NACDS and (especially) NCPA repeatedly claimed that AMP was only about “access for low-income patients.” They currently claim that the DRA (by itself) will lead to the closure of 10,000 to 12,000 pharmacies. These claims have been asserted and repeated without evidence even when objective reality provides factual reasons to doubt the claims. It helps that AMP is unloved and unwanted by almost everyone. I honestly wonder whether pharmacy advocates genuinely believe their own claims. There’s a useful lesson in doublethink propaganda here.

Pharmacies get a (small) profit reprieve. The larger chains, such as CVS and Walgreens (WAG), have not publicly quantified the impact of AMP, although the effect would not have been very large. Keep in mind that the DRA will only reduce retail pharmacy revenue by half of one percent annually – hardly the difference between poverty and riches (and hardly enough to sink 12,000 pharmacies).

Manufacturers will incur higher short term costs. Based on the latest timeline, manufacturers have already reported October 2007 AMPs using the new definition. If so, then manufacturers may need to run two parallel systems (Old AMP and Final Rule AMP) until the lawsuit is resolved. Manufacturers may even need to recalculate and resubmit their recent AMP data based on the old calculations.

The post-AWP future looks hazier. Average Wholesale Price (AWP) is still the primary benchmark for determining pharmacy reimbursement despite its well-known shortcomings and the short lifespan. I have previously suggested that AMP seemed to be a likely candidate for a replacement benchmark, especially for Part D plans. Payers and PBMs will be keeping a close eye on this case.

The government gets beaten (again). Last December, the FDA was successfully blocked from implementing the pedigree requirements of the Prescription Drug Marketing Act. (See No PDMA for you!) I wonder if these successes will increase the chances of a December 2008 injunction against the California Board of Pharmacy regarding e-pedigree.


I'll post again after I've digested the Injunction. In the meantime, I now need to revise my 2007 Year in Review!


  1. For those who have asked, the injunction has not been posted online because CMS wanted time to object to the exact terms proposed by drugstore industry plaintiffs. The preliminary injunction order won't be posted before Tuesday afternoon.

    Source: Drugstores Target New Medicaid Formula (AP story)



  2. For some additional insights about the injunction, check out Special News Alert--AMP Final Rule: Preliminary Injunction Update on The Pharma Compliance Blog.

    As a bonus, the author has some nice things to say about yours truly. I'm blushing!