Statement on the Health and Human Services Office of Inspector General: Review of the Relationship Between Medicare Part D Payments to Local, Community Pharmacies and the Pharmacies’ Drug Acquisition Costs (A-06-07-00107

Steven C. Anderson, IOM, CAE, President and Chief Executive Officer

Alexandria, VA – “We need to remember what the OIG report is and what it is not. This report underscores the need to ensure reimbursement is fair when both drug costs and costs of dispensing are considered, and to provide incentives for the utilization of generic drugs. It is not a comprehensive analysis of all costs associated with the drugs and services that pharmacies deliver to patients, as it focuses on only one side of the equation. Beyond analysis and critique of the data, NACDS believes a critical part of this story is the important role of pharmacy, medication adherence and Medicare Part D for the well-being of the health care system and individuals’ lives.

“While the OIG report compares drug acquisition costs and payments to pharmacies, it is essential to remember there are two components to actual pharmacy cost: the cost of the drug, and the cost to dispense the drug. OIG makes this important point in the report, saying ‘The dispensing cost information clarifies that our analysis did not account for all of the costs associated with dispensing prescription drugs.’ Considering drug costs in a vacuum is potentially misleading and counterproductive to health understanding and advancement. Let it be stated clearly: pharmacies are not overcompensated for the prescription drugs and services they provide to Medicare beneficiaries, and in fact the cost of dispensing is not adequately reimbursed. A recent study conducted by the accounting firm Grant Thornton found that the average cost to dispense a prescription drug is $10.50, whereas the OIG report indicates the average dispensing fee paid to pharmacies in Medicare Part D is $2.27.

“Increasing the use of generic drugs is important for controlling prescription drug costs. The higher dispensing rate of generics in the Part D program compared with other private plans demonstrates the value of creating incentives for pharmacies to promote the use of generics. We commend CMS for noting in its response to the report that ‘we fully encourage the use of generic drugs since their use provides good value to both the beneficiary and the taxpayers, and we note that incentives are aligned to encourage promotion of generics by community pharmacies.’

“America’s pharmacies and pharmacists have been credited by Secretary of Health and Human Services Mike Leavitt and Congressional leaders as the heroes of Medicare Part D. Convenient and trusted, community pharmacy has served as the main source of information about the benefit for millions of seniors.

“Access to brand and generic prescription medication, and increasing the likelihood that patients take their medication as prescribed, are vital to public health. Any analysis of the magnitude of prescription drug spending in the health care system must take into consideration its ability to prevent more costly forms of health care, such as catastrophic care and emergency room visits. In fact, even more should be done to encourage patients to take their medication as prescribed, and public policy should reflect the role of pharmacy in this effort.”