Tuesday, May 26, 2009

AMP: Salvation

A famous philosopher once opined: "The future's not set. There's no fate but what we make for ourselves."

The pharmacy lobby looks set to prove this aphorism true by preventing the use and/or publication of cost-plus Average Manufacturer Price (AMP) based reimbursement for generic drugs under Medicaid. Looking at two new pieces of evidence, I expect another legislative delay that will postpone implementation until at least late 2010 – and possibly repeal AMP altogether. Hasta la vista, AMP!

(Confused by the preceding paragraph? Read this post, this one, or go nuts and read everything tagged AMP.)

The latest evidence that judgment day will be postponed comes from the Senate Finance Committee. On page 27 of the recently released Expanding Health Care Coverage: Proposals to Provide Affordable Coverage to All Americans, the Committee proposes increasing the Federal Upper Limit (FUL) percentage for pharmacy reimbursement from 250% to 300% of AMP for generic drugs, which are technically referred to as "pharmaceutically and therapeutically equivalent multiple source drugs available nationally through commercial pharmacies." The document also proposes other unspecified "clarifications" and "modifications."

Here's another piece of evidence – it looks like CMS is not even planning for AMP implementation in FY2010. The Deficit Reduction Act of 2005 appropriated $5 million dollars for each of fiscal years 2006 through 2010 to carry out a survey of retail drug prices. If I am reading the budget document correctly (not sure), then the FY2010 budget for the Department of Health and Human Services (HHS) does not appear to be including the survey in HHS outlays. See the item labeled "Appropriation (Federal upper payment Limit for multiple source drugs)" (page 474).

The pharmacy industry continues to use its lobbying power, a trend that I have been following on Drug Channels for over two years. (See 2007 Trends: Lobbying for Pharmacy Profits from way back in January 2007.)

So here's some free advice – worth twice what you're paying.

If the pharmacy associations really want to get serious, they should send a cyborg back in time to terminate the AMP section from the Deficit Reduction Act of 2005, thereby avoiding this whole situation. Simple, really.


I didn't get a chance to see T4 this weekend, but Terminator fans will get a chuckle from 5 Reasons The Terminator Franchise Makes No Sense. (Warning: The link contains profanity, sci-fi nerdiness, and excessive snark.)


  1. AnonymousMay 26, 2009

    Another classic Adam post!

  2. AnonymousMay 26, 2009

    AMP may be on life support but it seems no one can save pharmacy from itself. What payor needs AMP when you have $4 generics. How long until the mac becomes $4?

  3. I see $5M across the board in HHS budget document for the FUL work -- '08 actual, '09 estimate, '10 estimate. Are you saying that the item doesn't specify the survey or the item is unfunded. At a glance it looks unfunded but that's for the item above. Would say the agency is continuing the work, but all subject to change in health reform, as you point out.

  4. MS,

    Note that the $5M is shown as "budget authority," which means that the funds have been authorized for spending. However, outlays (actual money spent) is less than budget authority for this entire category.

    According to my sources, the retail drug surveys and reports have been suspended (and the money can not be spent) until the injunction is lifted and the legislative moratorium is over ((10/1/09). Thus, the $5M per year is part of the difference between outlays and authority.

    Yes, I admit that this insight is wonky even by my usual standards!


  5. Adam,

    Thanks for the clarification. I trust your sources on the surveys more than I trust the budget document tea leaves. Looks like outlays are expected to exceed authority in 09 and 10, although I don't see itemized outlays (and this is putting me to sleep).

    Speaking of outlays exceeding authority, back to the CA budget gaps. Note the pharmacy reforms proposed by the Gov: "$75  million: Medi-Cal—Pharmacy Reforms. Implement new federal and state drug pricing policies aimed at lowering costs and retaining quality care. Effective October 1, 2009, these reforms would require federal Drug Pricing providers to dispense only drugs purchased through the program, would require manufacturers of HIV/AIDS/cancer drugs to pay rebates, establish upper billing limits for drugs, and would require therapeutic category review of antipsychotics ." Would love to hear what you and your sources know about the proposed "upper billing limit" and the apparent mandatory use of "Federal Drug Pricing." Thanks, Adam.

  6. Sorry, I haven't been following the CA budget developments that closely. But contact me privately if you'd like to discuss further.

    I think that "Outlays > Authority" will be a hallmark of the Obama administration.