The Affordable Care Act’s Success is Dependent upon the Health of the Independent Pharmacy

The Affordable Care Act provides Americans with better health security by putting in place comprehensive health insurance reforms that will:

  • Expand coverage,
  • Hold insurance companies accountable,
  • Lower health care costs,
  • Guarantee more choice, and
  • Enhance the quality of care for all Americans.

The Centers for Medicare & Medicaid Services is on a collision course with independent, retail community pharmacies because some experts conclude a drastic reduction in rural pharmacy networks will take place (see Perryman Group’s expectations for Texas) when it needs to be expanded to meet the commitments made by this legislation. TRxADE has become invaluable to the Independent Pharmacies as explained below!

The Affordable Care Act, ACA created new programs and initiatives and expanded and modified a number of existing HHS programs. The Secretary of Human & Health Services, HHS is responsible for many of the new programs in the Affordable Care Act. HHS programs created by the Affordable Care Act for which the Office of Inspector General (OIG) has work in progress or plans to start reviews in fiscal year (FY) 2012 are:

· Preexisting Condition Insurance Plans (PCIP), § 1101

· Early Retiree Reinsurance Program (ERRP), § 1102

· Health Insurance Web Portal, § 1103

· Affordable Insurance Exchanges, § 1311

· National Background Check program, § 6201

· Community Living Assistance Services and Supports

The Affordable Care Act will affect Retail Pharmacies in a number of areas:


The Affordable Care Act provides the CMS and the OIG with tremendous powers to eliminate fraud and waste in the healthcare marketplace. The independent, community retail pharmacy can expect a significant rise in the use of Recovery Audit Contractors “RAC.” These audits were created as a result of the 2005 Deficit Reduction Act in an attempt to decrease the cost of healthcare. An audit performed by the CMS is to: “identify improper Medicare payments and fight fraud, waste and abuse in the Medicare program.”

The same audit diligence will be implemented with state assistance over Medicaid overpayments, waste and abuse. Section 6411 of the Affordable Care Act of 2010 required States and territories to establish Medicaid Recovery Audit Contractor (RAC) programs. Medicaid RACs are tasked with identifying and recovering Medicaid overpayments and identifying underpayment. As an initial step for establishing their RAC programs, jurisdictions are expected to submit a Medicaid State Plan amendment (SPA) that addresses some of the essential elements of their RAC program.

TRxADE developed their e-store to provide the independent pharmacy immediate access to up-to-date compliance details for immediate response to RAC and insurance audits. What is available from your wholesaler?

Reimbursements and Pricing

The federal government will establish appropriate reimbursement and pricing benchmarks for brand and generic pharmaceuticals for all categories (Medicare, Medicaid, Thirdparty and Cash Retail Pricing). The CMS will publish data files for the following:

1. AMP, Average Manufacturing Price which when multiplied by the multiplier index of (1.75) established by the OIG results in:

2. FUL, Federal Upper Limit which is the ceiling on state Medicaid reimbursements.

3. NADAC, National Average Drug Acquisition Cost for brand and generic pharmaceuticals to be utilized by the CMS in evaluating state Medicaid drug costs and reimbursement formulas, Medicare, provided to payors for thirdparty cost and reimbursement guidelines and published for the benefit of the general public at large.

4. NARP, National Average Retail Price, also published and provided to the general public at large and utilized to set appropriate Medicare Part D and thirdparty reimbursements and cash retail pricing.

TRxADE provides pharmacies with analytical tools to purchase the appropriate product with the highest margins (net ingredient cost profit) at the lowest cost, on a real-time basis. The system also provides pharmacies with immediate access and response to transparency questions. The CMS will be using our files for cost referencing and therefore, our system becomes invaluable to refute reimbursements from all entities; especially Medicaid and Medicare.

Affordable Care Act & CMS Approval for State Medicaid Managed Care

Health insurance companies are clamoring for the substantial new business that will become available when Medicaid coverage is expanded to an estimated 20 million new individuals under the Affordable Care Act. Medicaid managed care is already wellestablished in state Medicaid programs.

At the same time that states gear up for the Affordable Care Act’s Medicaid expansion and the new health insurance exchanges, they are also grappling with budget shortfalls and looking increasingly to managed care to help control the costs of their Medicaid programs. Even more troubling than a geographic expansion of managed care is the potential expansion of managed care to additional populations including people with disabilities to achieve budgetary savings.

Perhaps the greatest shortcoming of adding 20 million individuals to the Medicaid population is that it does not account for the dynamic effects of a reduced network that limits access in many areas (particularly in rural regions), thus leading to complications and added healthcare expenses.

Particularly alarming is that pharmacy drug acquisition costs associated with providing services in rural communities are not accounted for in the new National Average Drug Acquisition Cost NADAC benchmark that determines reimbursements under Medicaid and Medicare. Only 10% of the CMS surveyed pharmacy population consisted of rural, retail community pharmacies.

The Perryman Group studied the effect of a reduced network in Texas under a managed care Medicaid program. They concluded that: “It’s imperative that any future program (whether feeforservice or managed care) maintain a comprehensive network. The costsaving measures outlined by Texas Human & Health Services and the likely associated network limitations will harm the community pharmacy sector including the loss of more than 770 (primarily independent and small chain) locations, nearly $1.6 billion in gross product and 22,135 jobs.

It is improbable that quality pharmaceutical services can be maintained and expanded to 20 million additional Medicaid participants when rural pharmacy reimbursements are declining under the Affordable Care Act and the network of pharmacies are receding.

Does your primary distributor keep you constantly informed of public affairs that are vitally importance in maintaining a profitable pharmacy? TRxADE does! We are developing data that hopefully, will be of value in monitoring the implementation of the Affordable Care Act.