The government has come up with a new way of determining the cost of drugs when reimbursing generic drugs to pharmacies in the Medicaid program. The government will take the lowest average manufacturer pricing (AMP) in a drug class and multiply that by 250 percent.
Medicaid is a program designed to assist those with lower incomes. Primarily it helps children, single mothers, pregnant women, and at one time, senior citizens.
Max Heidrick, owner of S and S Drugs in Beloit, Kansas, says his prices for purchasing drugs are different than that of V.A. Hospitals and mail order companies. Companies like that are able to buy their drugs in bulk and are therefore able to cut out the middleman and get a better price. Heidrick is not.
The new legislation will set the allowed cost of the drug 36 percent below what independent pharmacies are able to purchase it for. The equation could play out like this: A medication costs your pharmacy $20.00. The new Medicaid guidelines allow a cost of only 64 percent of the drug or $12.80. The pharmacy is paid the allowed cost of the drug plus a dispensing fee of $3.00. This would result in a total payment to the pharmacy of $15.80. This is $4.20 less to the pharmacy than the cost of the drug.
A recent survey in the pharmacy industry reveals the cost of a pharmacy to dispense a prescription is $10.50. The pharmacy has a cost of the drug at $20.00 and the cost of dispensing at $10.50 for a total of $30.50. This adds up to a loss of $14.70 for that particular drug.
Heidrick says this will force him to look at his Medicaid contract more thoroughly. Ultimately, if it means he is going to lose money, then he will not renew it. "We can't continue to lose money," said Heidrick.