
A new Medicaid rule has retail pharmacies worried that lower reimbursements for popular generic drugs might cause their profits—and their business—to disappear. But the pharmacies had better not hold their breath as they wait for Congress to come to their rescue.
Published on July 6, 2007, the new rule essentially implements a congressional law in 2006 that requires Medicaid to adjust how the average manufacturer’s price (AMP) is calculated; the AMP, in turn, determines a state’s reimbursement to pharmacies. This ruling affects only generic drugs, not brand-name products. The federal government reimburses the states for patients’ drug expenditures according to an impossibly confusing formula built around a concept called “federal upper limits.” The formula, consequently, depends on the AMP.
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