CMS Boosts Medicaid for Texas Druggists

The Texas pharmacy industry is still celebrating a major victory after a federal agency agreed last week to help fund an increase in the amount drug stores are paid to fill Medicaid prescriptions.

The decision by the Centers for Medicare and Medicaid Services, also known as CMS, to approve the Texas State Plan Amendment for pharmacy dispensing fees heads off a crisis that could have affected hundreds of thousands of Texans who rely on Medicaid for prescriptions.

Two years ago, the state Legislature approved additional reimbursement funds to pharmacies that fill Medicaid prescriptions. But the federal government took issue with the state plan, and for the last two years, those additional reimbursement funds have been paid solely by Texas, without the usual federal match.

Consequently, the state would have stopped paying the additional funds as soon as this month had CMS not finally approved the plan.

Officials say without CMS's approval, some pharmacies would have been forced to stop filling Medicaid prescriptions because of the financial blow incurred from each transaction.

"Everyone would have taken a hit," said Richard Beck, executive director of the Texas Pharmacy Business Council, a trade organization that represents 1,700 independent community pharmacies.

Before the increase in 2007, Texas pharmacies on average were being reimbursed by almost $3 less than the cost to fill a Medicaid prescription, according to data from the University of Texas at Austin. Under the increase, pharmacies have been reimbursed on average at levels from breaking even to just below cost. This year's average was about 71 cents less than the cost.

In 2007 the state Legislature authorized an increase in the "fixed component" of the dispensing fee from $5.14 to $7.50. It also called for a minute increase - from 1.95 percent to 2 percent - in the "variable component" of the fee that pays the cost of medication.

Stephanie Goodman, a spokeswoman for the Texas Health and Human Services Commission, which is in charge of Medicaid on the state level, said CMS took issue with fact that Texas uses a "variable component" to cover the cost of drugs, and is the only state to do so. Texas' stance is that such a sliding scale makes it possible for pharmacies to offer expensive drugs and be compensated more fairly for them.

CMS did not return a request for comment.

Since 2007, Texas has spent roughly $42 million, without federal matching funds, to pay for the fee increase, Goodman said.

Texas now will recoup the money spent and will start to receive about 60 percent in matching funds to pay for the program moving forward.

The lengthy delay, Goodman said, was due in large part to CMS' concern about the validity of the study Texas initially used to support the increase.

To address those federal concerns, state officials contracted researchers at UT Austin to conduct a study on the cost of dispensing prescriptions.

The results show the average cost of filling a prescription in 2008 was $9.61, while the average reimbursement Texas paid even under the new plan was $9.02. The average discrepancy between filling a prescription and actual reimbursement is set to grow again this year, according to the study.

"The data that was collected had a tremendous impact on the final decision," said Raymond Carvajal of San Antonio's Carvajal Pharmacy. "There were no ifs, ands or buts about it. The documentation was there."