The GAO recently issued a report on CMS efforts to implement Medicaid drug pricing reforms mandated by the Affordable Care Act (ACA). Specifically, the report discusses CMS development of the National Average Drug Acquisition Cost (NADAC) benchmark of retail pharmacy acquisition costs, and how NADAC amounts compare to ACA-based federal upper limits (FULs). Based on first quarter 2013 data, GAO found that draft FUL amounts calculated under the ACA formula were about 1.4% lower than the total NADAC amount in aggregate for 1,035 outpatient drugs. On the other hand, ACA-based FULs for individual drugs ranged from 96% lower than to 404% higher than the NADACs for the same drugs. The GAO also found large differences between the total ACA-based FUL amount and the total NADAC amount for generic and for branded generic versions. According to the GAO, total ACA-based FUL amount for the generic versions was 19% higher than the total NADAC amount, but for the branded generic versions the ACA FUL amount was 26% lower than the NADAC.
The GAO concluded that CMS is close to having a formula under which FULs would better reflect pharmacy acquisition costs, but it observes that CMS continues to apply FULs that were calculated more than four years ago. The GAO also observed that the relationship between ACA-based FULs and NADACs may be affected by factors such as rebates and discounts that are not reflected on pharmacy invoices, which will necessitate continued CMS monitoring. The GAO therefore recommended that CMS (1) expeditiously implement the ACA-based FUL formula and (2) monitor the relationship between the ACA-based FULs and the NADACs on an ongoing basis. HHS concurred with these recommendations; noting that it intends to finalize the ACA Medicaid FULs for multiple source drugs in July 2014 (CMS indicated to GAO that the agency was still considering how the ACA-based FULs would apply to branded generic versions in the final rule).