E-prescribing provisions of the 2008 Medicare Bill

E-prescribing provision from the recently passed Medicare bill (H.R. 6331).
The Bill is entitled: The Medicare Improvement for Patients and Providers Act of 2008

• Follow this link for the bill text (PDF)

SEC. 132. INCENTIVES FOR ELECTRONIC PRESCRIBING.

(a) INCENTIVE PAYMENTS.—Section 1848(m) of the Social Security Act, as added and amended by section 131(b), is amended—
(1) by inserting after paragraph (1), the following new paragraph:
(2) INCENTIVE PAYMENTS FOR ELECTRONIC PRESCRIBING.—

(A) IN GENERAL.—For 2009 through 2013, with respect to covered professional services furnished during a reporting period by an eligible professional, if the eligible professional is a successful electronic prescriber for such reporting period, in addition to the amount otherwise paid under this part, there also shall be paid to the eligible professional (or to an employer or facility in the cases described in clause (A) of section 1842(b)(6)) or, in the case of a group practice under paragraph (3)(C), to the group practice, from the Federal Supplementary Medical Insurance Trust Fund established under section 1841 an amount equal to the applicable electronic prescribing percent of the Secretary’s estimate (based on claims submitted not later than 2 months after the end of the reporting period) of the allowed charges under this part for all such covered professional services furnished by the eligible professional (or, in the case of a group practice under paragraph (3)(C), by the group practice) during the reporting period.

(B) LIMITATION WITH RESPECT TO ELECTRONIC PRESCRIBING QUALITY MEASURES.—The provisions of this paragraph and subsection (a)(5) shall not apply to an eligible professional (or, in the case of a group practice under paragraph (3)(C), to the group practice) if, for the reporting period (or, for purposes of subsection (a)(5), for the reporting period for a year)—
(i) the allowed charges under this part for all covered professional services furnished by the eligible professional (or group, as applicable) for the codes to which the electronic prescribing quality measure applies (as identified by the Secretary and published on the Internet website of the Centers for Medicare & Medicaid Services as of January 1, 2008, and as subsequently modified by the Secretary) are less than 10 percent of the total of the allowed charges under this part for all such covered professional services furnished by the eligible professional (or the group, as applicable); or
(ii) if determined appropriate by the Secretary, the eligible professional does not submit (including both electronically and nonelectronically) a sufficient number (as determined by the Secretary) of prescriptions under part D.
If the Secretary makes the determination to apply clause (ii) for a period, then clause (i) shall not apply for such period.

(C) APPLICABLE ELECTRONIC PRESCRIBING PERCENT.— For purposes of subparagraph (A), the term ‘applicable electronic prescribing percent’ means—
(i) for 2009 and 2010, 2.0 percent;
(ii) for 2011 and 2012, 1.0 percent; and
(iii) for 2013, 0.5 percent.’’;
(2) in paragraph (3), as redesignated by section 131(b)—
(A) in the heading, by inserting AND SUCCESSFUL ELECTRONIC PRESCRIBER’’ after REPORTING’’; and
(B) by inserting after subparagraph (A) the following new subparagraph:

(B) SUCCESSFUL ELECTRONIC PRESCRIBER.—

(i) IN GENERAL.—For purposes of paragraph (2) and subsection (a)(5), an eligible professional shall be treated as a successful electronic prescriber for a reporting period (or, for purposes of subsection (a)(5), for the reporting period for a year) if the eligible professional meets the requirement described in clause (ii), or, if the Secretary determines appropriate, the requirement described in clause (iii). If the Secretary makes the determination under the preceding sentence to apply the requirement described in clause (iii) for a period, then the requirement described in clause (ii) shall not apply for such period.

(ii) REQUIREMENT FOR SUBMITTING DATA ON ELECTRONIC PRESCRIBING QUALITY MEASURES.—The requirement described in this clause is that, with respect to covered professional services furnished by an eligible professional during a reporting period (or, for purposes of subsection (a)(5), for the reporting period for a year), if there are any electronic prescribing quality measures that have been established under the physician reporting system and are applicable to any such services furnished by such professional for the period, such professional reported each such measure under such system in at least 50 percent of the cases in which such measure is reportable by such professional under such system.

(iii) REQUIREMENT FOR ELECTRONICALLY PRESCRIBING UNDER PART D.—The requirement described in this clause is that the eligible professional electronically submitted a sufficient number (as determined by the Secretary) of prescriptions under part D during the reporting period (or, for purposes of subsection (a)(5), for the reporting period for a year).

(iv) USE OF PART D DATA.—Notwithstanding sections 1860D-15(d)(2)(B) and 1860D-15(f)(2), the Secretary may use data regarding drug claims submitted for purposes of section 1860D-15 that are necessary for purposes of clause (iii), paragraph (2)(B)(ii), and paragraph (5)(G).

(v) STANDARDS FOR ELECTRONIC PRESCRIBING.— To the extent practicable, in determining whether eligible professionals meet the requirements under clauses (ii) and (iii) for purposes of clause (i), the Secretary shall ensure that eligible professionals utilize electronic prescribing systems in compliance with standards established for such systems pursuant to the Part D Electronic Prescribing Program under section 1860D–4(e).’’; and (3) in paragraph (5)(E), by striking clause (iii) and inserting the following new clause:
(iii) the determination of a successful electronic prescriber under paragraph (3), the limitation under paragraph (2)(B), and the exception under subsection (a)(5)(B); and’’.
(b) INCENTIVE PAYMENT ADJUSTMENT.—Section 1848(a) of the Social Security Act (42 U.S.C. 1395w–4(a)) is amended by adding at the end the following new paragraph:

(5) INCENTIVES FOR ELECTRONIC PRESCRIBING.—

(A) ADJUSTMENT.—

(i) IN GENERAL.—Subject to subparagraph (B) and subsection (m)(2)(B), with respect to covered professional services furnished by an eligible professional during 2012 or any subsequent year, if the eligible professional is not a successful electronic prescriber for the reporting period for the year (as determined under subsection (m)(3)(B)), the fee schedule amount for such services furnished by such professional during the year (including the fee schedule amount for purposes of determining a payment based on such amount) shall be equal to the applicable percent of the fee schedule amount that would otherwise apply to such services under this subsection (determined after application of paragraph (3) but without regard to this paragraph).

(ii) APPLICABLE PERCENT.—For purposes of clause (i), the term ‘applicable percent’ means—
(I) for 2012, 99 percent;
(II) for 2013, 98.5 percent; and
(III) for 2014 and each subsequent year, 98 percent.

(B) SIGNIFICANT HARDSHIP EXCEPTION.—The Secretary may, on a case-by-case basis, exempt an eligible professional from the application of the payment adjustment under subparagraph (A) if the Secretary determines, subject to annual renewal, that compliance with the requirement for being a successful electronic prescriber would result in a significant hardship, such as in the case of an eligible professional who practices in a rural area without sufficient Internet access. ‘

(C) APPLICATION.—

(i) PHYSICIAN REPORTING SYSTEM RULES.—Paragraphs (5), (6), and (8) of subsection (k) shall apply for purposes of this paragraph in the same manner as they apply for purposes of such subsection.

(ii) INCENTIVE PAYMENT VALIDATION RULES.— Clauses (ii) and (iii) of subsection (m)(5)(D) shall apply for purposes of this paragraph in a similar manner as they apply for purposes of such subsection. ‘

(D) DEFINITIONS.—For purposes of this paragraph:

(i) ELIGIBLE PROFESSIONAL; COVERED PROFESSIONAL SERVICES.—The terms ‘eligible professional’ and ‘covered professional services’ have the meanings given such terms in subsection (k)(3).

(ii) PHYSICIAN REPORTING SYSTEM.—The term ‘physician reporting system’ means the system established under subsection (k).
(iii) REPORTING PERIOD.—The term ‘reporting period’ means, with respect to a year, a period specified by the Secretary.’’.

(c) GAO REPORT ON ELECTRONIC PRESCRIBING.—Not later than September 1, 2012, the Comptroller General of the United States shall submit to Congress a report on the implementation of the incentives for electronic prescribing established under the provisions of, and amendments made by, this section. Such report shall include information regarding the following:

(1) The percentage of eligible professionals (as defined in section 1848(k)(3) of the Social Security Act (42 U.S.C. 1395w– 4(k)(3)) that are using electronic prescribing systems, including a determination of whether less than 50 percent of eligible professionals are using electronic prescribing systems.

(2) If less than 50 percent of eligible professionals are using electronic prescribing systems, recommendations for increasing the use of electronic prescribing systems by eligible professionals, such as changes to the incentive payment adjustments established under section 1848(a)(5) of such Act, as added by subsection (b).

(3) The estimated savings to the Medicare program under title XVIII of such Act resulting from the use of electronic prescribing systems.

(4) Reductions in avoidable medical errors resulting from the use of electronic prescribing systems.

(5) The extent to which the privacy and security of the personal health information of Medicare beneficiaries is protected when such beneficiaries’ prescription drug data and usage information is used for purposes other than their direct clinical care, including—

(A) whether information identifying the beneficiary is, and remains, removed from data regarding the beneficiary’s prescription drug utilization; and

(B) the extent to which current law requires sufficient and appropriate oversight and audit capabilities to monitor the practice of prescription drug data mining.

(6) Such other recommendations and administrative action as the Comptroller General determin

SureScripts-RxHub

On July 1, the public was informed that SureScripts and RxHub merged into a single entity called, for the present, SureScripts-RxHub.

• Follow this link to the press release
• Follow this link to the WSJ coverage
  
• See coverage in the Washington Post
• Read the Associated Press release
  

This is exciting news for health care and for me personally. As an Express Scripts VP, I had the good fortune to be present through the planning for the formation of RxHub and, until the formation of the new company, was more recently a member of the SureScripts Board. So I've been a direct witness to the great efforts of both organizations. I add as well that the only facts in this posting are publicly available and that any conjecture on my part is simply that; I have not speculated in areas that I may have formally discussed with either entity.

History
RxHub was originally formed in 2001 by three pharmacy benefits managers (PBMs) - Advance/PCS (not yet acquired by CareMark), Express Scripts, and MedCo. With various acquisitions, the current owners of RxHub are Caremark, Express Scripts, and Medco. Other PBMs are planning participation. RxHub was formed primarily to simplify the task of e-prescribing for vendors. Since this organization (and SureScripts as well) were formed before standards were promulgated at a national level, these organizations were de facto standard setting bodies. RxHub derives its revenue from formulary eligibility checks and its costs are offset primarily by PBMs. Medication histories are based on medical claims. The first CEO of RxHub was Jim Bradley, now the Chairman of the Board of Prematics.

SureScripts was also established in 2001 by NACDS (National Association of Chain Drug Stores) and NCPA ( National Community Pharmacists Association) - the leading retail pharmacy associations. SureScripts derives its revenue from true e-prescribing messages (new scripts or refills) but not from fax messages; these costs are payed by pharmacies and additional funding is through various debt mechanisms. Medication histories and messaging is primarily through NCPDP SCRIPT. The founding CEO of SureScripts was Kevin Hutchinson, who now serves as CEO of Prematics under Jim Bradly.

Hence, over the past few years the charismatics founders of both RxHub and SureScripts are now working on the vendor end and hence working through the very organizations they created. Small, small, world.

From the outset, these two organizations both competed in some sectors and demonstrated remarkable collaboration in others. In principle, a direct connection between e-prescribing systems and PBMs through RxHub presented the theoretical opportunity to promote diversion of prescriptions from retail phramcies to PBM mail order pharmacies. An effort by the retail pharmacies to promote direct connectivity would mitigate this risk. Similarly, a direct connection with pharmacies without the presentation of formularly options would not simplify the process of PBM-based drug trend management. Both RxHub and SureScripts, no doubt, saw the need to simplify the process of e-prescribing. Both were committed absolutely to establishing national standards to simplify medication management and both actively participated in standards bodies long before the establishment of the HITSP structure created by the HHS Office of the Network Coordinator.

Standards were the easy part. Progress in medication management has been slow in coming. E-prescribing is a complex "dance" among the prescriber and staff, the pharmacy and staff, and the consumer. Each must re-think their activities and deviate from the norms set by fax-based or paper-based prescribing. In many areas, adoption of e-prescribing has been much slower than many of us would have expected. We underestimated the complexity of the system and the comprehensive effort required to provide incentives sufficient to change the behavior of prescriber, dispensing pharmacist, and consumer.

But recent progress is heartening. Where PBM coverage is high, medication histories are increasingly available through RxHub and eligibility checks are growing in frequency. Particularly where chain drugs stores are dominant, true e-prescribing (digital communications, not fax) is growing and fax is disappearing. Still less than 5% of prescriptions are at present sent in digital format.

The New Organization
The new organization will be governed 50:50 by the organizations that founded RxHub and SureScripts. Board composition will be 3 members from the PBM industry and 3 from the retail pharmacy. Management will be under to interim co-CEOs, J.P. Little and Rick Ratliff, who formerly were acting CEOs of RxHub and SureScripts, respectively.

The joint organization will maintain its prohibition of commercial messaging. Given the numerous tensions and differing business models, one can also reasonably assume that secondary sale or distribution of data will not be practiced (although each source PBM or pharmacy, one would assume, will continue whatever their current business practices are). In my personal view, the combined organization presents no new threat to the public through commercial intrusion or misuse of personal health information.

SureScripts-RxHub can be expected to emphasize the following practices in a more consistent and uniform way:

• Prescription routing. One imagines that the SureScripts' capabilites will be enhanced to expedite digital messaging between prescribers and pharmacies to simplify the ordering, dispensing, refill requests, and medication fill status. Perhaps the PBM mail order pharmacies will be added to the SureScripts network.
• Payor transactions. The RxHub eligibility checks will presumably continue to be developed to simplify coverage notification and formularies. (Suggestion to the PBM industry; a few hundred - or thousand fewer formulary and nuanced prior authorization rules would simply things immeasurably). Both SureScripts and RxHub supported various repositories of formulary and eligibility information; presumably there is some redundancy here and simplification will be a benefit to vendors and clinicians.
• Rx history. This is perhaps the most exciting and uninished piece of work that can be addressed by the joint entity. Currently, historical data - if it is present at all - comes via the RxHub claims database or from SureScripts NCPDP script messages. But the RxHub database is claims-based and may suffer both from latency and incompleteness (if low cost-drugs are not entered into the claims database or if the individual is either self-pay or enrolled in a plan not currently connected to RxHub). Although virtually every chain drug store and the majority of independent pharmacies can communicate through e-presribing standards, many SureScripts member pharmacies have not completed medication history service agreements nationwide, but such agreements are anticipated in the next few months. Much work will have to be done. My guess (often wrong) is that prescribers will demand such a service at no cost as a quid pro quo for e-prescribing. Consumers will demand audit logs and various forms of authentication to ensure their medication histories are only accessed for appropriate reasons. As I have argued repeatedly, echoing the Commission for Systemic Interoperability Report of 2005. One of the major national health information technology priorities should be the creation of services that provide complete, reliable, and confidential prescription medication histories for every American. Sadly, although NHIN, ONC, HHS, and others have endorsed standards (often those emphasized by RxHub and SureScripts), follow-through has been disappointing and, to the best of my knowledge, the merger of these two entities is the result of a private-sector business need in the public interest, not the result of top-down regulatory pressure from the government. Fortunately members from both organizations have worked to simplify and advance the currently somewhat complex ONC medication management use case.
  
• Pharmacy interoperability and care support. One can expect the combined entity to continue its enhancement of patient health information messaging among providers and dispensers to ensure better coordination and safer medication use.
• Network support. The at times conflicting interests of the retail, chain, and PBM organizations (as well as the comepition within each sector) will necessitate contiuation of the tradition of neutrality, transparency, and efficiency currently critical to the success of each organizations. Again, the very tensions among the stake holders act, in my view, in the public interest here.

Implications
The announcement is great news for American consumers, health care organizations, intermediaries, and the health information management industries. Pressure for mandatory e-prescribing is mounting. The DEA has been under considerable congressional pressure to allow controlled-substances to be prescribed through digital devices and has issued a Notice of Proposed Rule Making (Federal Register June 27, 2008, volume 73, number 125).

At present, e-prescribing is still an incompletely practiced new form of coordination among prescriber, dispensing pharmacist, and the consumer. It is a system where everyone has to see benefit and change their behavior in some ways. There are many benefits in an ideal world, but in many instances, a lot of work must be done. Change is not easy.

The timing could not be better. Clinicians (both prescribers and dispensers), the staff working within clinical organizations, vendors, and the public are facing a complex array of challenges. In most instances, successful implementation of e-prescribing solutions for communities is the product of de facto collaboration among SureScripts, RxHub, pharmacies, payers, intermediaries, clinicians, and the public. Anything that simplifies the overall process should be applauded.

We are fortunate that the two organizations forming this new entity have complementary missions and have demonstrated a track-record of collaboration. Formalizing this relationship comes at a critical juncture. It is a unique and positive story.

Let us all wish them the best of luck.

Two New e-Prescribing Reports

The Summer of 2008 will not be a time of rest for the e-prescribing and medication management industry. As part of what may be only an initial new round of industry and organizational activity, two reports have been released within the past week.

• The Center for Health Transformation has released a report entitled "Electronic Prescribing: Building, Deploying and Using E-prescribing to Save Lives and Save Money"
• The eHealth Initiative and the Center for Improving Medication Management have released a report entitled "Electronic Prescribing: Becoming Mainstream Practice"

The CHT report provides an optimistic review with a highlight of many of the activities taking place across the country. The Southeast Michigan initiative, in particular, is worth note. The report emphasizes the value realized when medication management changes are implemented in a systematic and thoughtful way.

The eHI / CIMM report has a more thoughtful, cautionary tone.

The report identifies six issues that require additional work; none of these issues prohibits effective use, but each issue must be considered carefully as policy evolves:

1. Financial cost
2. Workflow change
3. Change management
4. Ban on transmitting prescriptions for controlled substances
5. Hardware and software selection
6. Pharmacy, payer/PBM, and mail order connectivity
7. Remaining standards require approval: prior authorization, structured and codified SIG, and RxNorm.
8. Unresolved challenges in medication reconciliation

The steering group also made five very important recommendations. Summarized, they are:

1. The federal government must address the DEA prohibition on e-prescribing of controlled substances.
2. Payers, employers, health plans, health systems, and federal and state governments should consider replicating and expanding successful incentive programs.
3. Care providers across every setting of health care should adopt and effectively use e-prescribing.
4. Create a public-private multi-stakeholder advisory body to monitor, assess, and make recommendations to accelerate the effective use of e-prescribing.
5. All stakeholders should advance the e-prescribing infrastructure.The federal government and the private sector should continue, and accelerate, the development of standards for e-prescribing.

These are good reports, well worth the read before the rhetoric increases to an even greater extent.

Gorman Health Group eRx Report

The Gorman Health Group released a report on e-prescribing funded by PCMA. The July 12 study outlines three options for increasing e-prescribing in Medicare.

• Follow this link to the e-Rx study (PDF)
• Follow this link for a survey summary (PDF)
• Follow this link for their eRx survey (PDF)
  

Their press release outlines the options as follows:

Option #1—Requirement Plus Incentives: Implementing a requirement that e-prescribing is used for all Part D prescriptions by 2010 combined with annual incentives for participating physicians equal to 1 percent of their allowed Medicare payments could reduce 2008-2017 federal healthcare costs by $26 billion and help physicians avoid 1.9 million adverse drug events over the next ten years.

Option #2—Requirement Only: Implementing only a requirement that all Part D prescriptions be written electronically by 2010 could reduce 2008-2017 federal healthcare costs by $29 billion and help physicians avoid 1.6 million adverse drug events over the next ten years.

Option #3—Incentives Only: Implementing only incentives for participating physicians equal to 1 percent of their allowed Medicare payments could reduce 2008-2017 federal healthcare costs by $2 billion and help physicians avoid 300,000 adverse drug events over the next ten years.

CMS Proposes Eliminating FAX Exemption

Buried in a larger document for physician fee schedules, CMS published a proposed rule to force physicians and other providers to implement more advanced data transmission standards when sending electronic prescriptions. This would terminate an exception that was essential, in this writer's view - to early adoption of eRX technologies.

• Follow this link for the proposed rule
• Follow this link for a two page fact sheet from CMS
• Follow this link to the public comments site
  

The proposed new rule is part of a 2008 physician fee schedule and would require all transmission to follow the recently published standards (see other postings).

The fact sheet states that "Computer-generated faxing retains some of the disadvantages of paper prescribing. For example, the pharmacy incurs the administrative cost of keying the prescription into the pharmacy system and there is a potential for data entry errors that may have an adverse impact on patient safety. CMS believes it is important to take steps to encourage prescribers and dispensers to move toward the use of the Script standard. Therefore, CMS is proposing to eliminate the computer-generated fax exemption for all prescriber/dispenser transactions." This writer agrees, but the impact on work flow cannot be understated. This writer has done some impact analysis on removal of this exemption and believes it could drive prescription processing labor costs upward for both prescribers and pharmacies in the short term. Essentially, from a work-flow perspective, most authorities haven't been able to differentiate much savings between fax and true eRx. The real savings are realized by eliminating phone calls. But trouble with direct communications will increase calls.
Independent pharmacies in small communities may face the greatest short term hurdle.

Public comments will be received until August 31. There will be many valid concerns raised.

Prescription Drug Pricing: MAC can make you Wacky

To understand the pricing of prescription drugs, one must wade through a number of acronyms and concepts that have evolved over time and, in this writer's opinion, obfuscate rather than clarify pricing. Understanding the history of prescription drug pricing seems important if one is to develop a transparent pricing approach. But here is an irony, although CMS has the authority to ensure that where applicable manufacturer's sales information on average manufacturer price and best price are correct (see below), the Social Security Medicare Part D legislation requires that this information be kept confidential and hence it is not publicly available.

Terms

Average Wholesale Price (AWP).

"The AWP has often been equated with a “sticker price” or “list price,” as those terms are used in the automobile industry. It has become an important prescription drug pricing benchmark for payers throughout the health care industry. Payments are typically based on AWP minus some percentage. Despite its name, however, the AWP is not an accurate reflection of actual market prices for drugs. As noted, it is a price derived from self-reported manufacturer data for both branded and generic drugs. There are no requirements or conventions that the AWP reflect the price of any actual sale of drugs by a manufacturer, or that it be updated at established intervals. It is not defined in law or regulation, and it fails to account for the deep discounts available to various payers, including certain federal agencies, providers, and large purchasers, such as HMOs. Consequently, the AWP has been the subject of great criticism and scrutiny." (Source: Wikipedia)

Wholesale Acquisition Cost (WAC).

The price a wholesaler pays to a manufacturer for a drug. It is a published price that does not include rebates or discounts. Sometimes called the "catalog price." (Source: Gencarelli)

Average Manufacturer’s Price (AMP).

The average price paid to manufacturers by wholesalers (less discounts) for a particular dosage form and strength of a prescription drug distributed solely to the retail pharmacy class of trade. The AMP is not a published price. It is calculated by the manufacturer and submitted to CMS for purposes of calculating the Medicaid rebate. (Source: Gencarelli)

Maximum Allowable Cost (MAC).

The highest price a health plan or other intermediary will pay for medications. This cost figure becomes most relevant when there are more than two generic options available for the drug. Maintaining a list of these costs across all drugs is, as one document describes it, "tedious and expensive."

Federal Supply Schedule (FSS).

Obtained from market transaction data reported by manufacturers. In general, FSS may not be higher than the lowest price charge by the manufacturer for non-federal purchasers. That is, the federal government should never pay more than any other plan or intermediary. Some federal bodies (e.g., the VA) set price according to FSS.

Federal Upper Limit (FUL).

This is a ceiling paid when there are more than three generic options available. It is set at 150% of the least costly therapeutic equivalent that can be purchased by pharmacies in quantities of 100 tables. (Source Gencarelli)

Estimated Acquisition Cost (EAC).

This is the other upper limit complementing the FUL. EAC is a state's estimate of price paid by providers for a drug. It is often used for single-source (e.g., "brand") drugs. Most states use AWP to calculate EAC.

Average Sales Price (ASP).

The average of all final sales prices charged for a prescription drug in the United States to all purchasers (including mail order pharmacies) excluding those sales that
are exempt from inclusion in the “best price” for Medicaid drug rebate
purposes. Defined by the OIG-mandated corporate integrity agreement with TAP pharmaceuticals.

Usual and Customary Charge.

The common charge to the public for a prescription drug.

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References

AWP (Wikipedia)

Medicaid Prescription Reimbursement by State (CMS). A comprehensive Web resource.

Follow the Pill: Understanding the U.S. Commercial Pharmaceutical Supply Chain. Health Strategies Consultancy for the Kaiser Family Foundation (March, 2005)

Dawn M. Gencarelli (June_7, 2002). "Average Wholesale Price for Prescription Drugs: Is There a More Appropriate Pricing Mechanism?" (pdf). National Health Policy Forum. Includes definitions of all terms. Appendix 1 contains Medicaid dispensing and cost sharing as of 2002 for each state. It is instructive.

Office of the Inspector General (2002). Actual acquisition costs of generic prescription drug products.

Office of the Inspector General (2002). Additional analysis of the actual acquisition cost of prescription drug products.

Abramson, et. al. Generic Drug Cost Containment in Medicaid: Lessons from Five State MAC Programs. Health Care Financing Review. Spring 2004. 25 (3), 25-34.

HHS Office of the Inspector General (October, 2003). State Strategies to Contain Medicaid Drug Costs (OEI-05-02-00680).

HHS Center for Beneficiary Choices. Lower Cash Pricing (October 11, 2006). Describes the CMS approach to Wal-Mart $4 generics and similar programs.

HHS Center for Beneficiary Choices. Scope of work: State-to-State Plan Reconciliation (July 7, 2006). Describes the data fields (including "usual and customary charge") that will be submitted by states to Public Consulting Group (PCG) to study costs incurred by states for dual-eligible and low-income subsidy entitled beneficiaries during their transition to Medicare Part D. States will then work with CMS and its contrator to establish reimbursement parameters based on eacch state's liability for either primary or secondary payment under Part D claims.

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How this works.

First, a state determines a dispensing fee. Examples abound.
Second, a state determines a reimursement for ingredient costs. This is often AWP less some percent (usually 5-15%) or WAC + some percent (around 5%) - whichever is lower.

Remember that the federal government pays some portion of the charge, depending on the state. (Follow this link to the Kaiser Family Foundation's table of federal matching rates.) The rate in Tennessee for 2007 is 63% and the rate in Florida is 58%.

States or other intermediaries then receive rebates from manufacturers equal to some percentage of the AMP. It is higher (15% a good number) for "sole source" drugs (e.g., "brand names) and a bit lower (around 10%) for multi-source drugs (e.g., generics). Sometimes the rebate is the difference between the AMP and the best price. Sometimes it is further increased if prices exceed the CPI or other inflation indicators. The Federal rebate amount is the same for all states and established by 42 U.S.C. 1296r-8(a).

CMS releases e-prescribing pilot reports

CMS released the evaluation report from their five e-prescribing projects. The five pilot sites are among the leading experts in the field of e-prescribing: RAND, Ohio KePRO/UHMP, Brigham and Women's Hospital, SureScripts, and Achieve Healthcare. A summary of their results as well as additional analyses and recommendations is included in the evaluation report.

This writer had the opportunity to contribute to this effort with Chelle Woolley, Kevin Johnson, Adil Moiddudin, and many others.

Follow this link for the summaries:

• Follow this link for the draft congressional report
• Follow this link for the AHRQ HealthIT html report
  
• Follow this link for the complete NRC / AHRQ evaluation report (pdf)
• Follow this link for the complete NRC /AHRQ evaluation report (text)
  

Follow these links for the individual evaluations:

• Follow this link for Achieve Healthcare Technology's report
• Follow this link for the Brigham report
• Follow this link for the Ohio report
• Follow this link for the RAND report
• Follow this link for the SureScripts report