Paying for Prescribed Drugs in Medicaid: Current Policy and Upcoming Changes

Appendix Table 1: Existing Research on Pricing Benchmark Comparisons
Topic Author & Publication Year Findings
EAC/AAC Benchmarks OIG, 2005 The OIG found that AMP was 23 percent lower than AWP for single-source brands, 28 percent lower for multiple-source brands, and 70 percent lower than AWP for generics (all differences measured at the midpoint of the distribution in the sample). AMP was 4 percent lower than WAC for single-source brands, 8 percent lower for multiple-source brands, and 25 percent lower for generics. There was much more variation in the percentage differences between AMP and published prices for generics than for brands.1
OIG,2011 The OIG compared AMPs, AWPs, and WACs to November 2010 invoice prices from a sample of pharmacies (as a proxy for acquisition costs). Invoice prices were generally about 15-20 percent lower than AWPs for single-source brands, with some larger differences among multiple-source brands. Invoice prices for generics without FULs ranged from 5 percent to 95 percent less than AWP, with no consistent relationship. WAC and AMP values were about the same as invoice prices for single-source brands but, as with AWP, the relationships were much more variable for multiple-source brands and generics without FULs. AMP was the least consistent benchmark.2
AMP-Based FULs GAO,2013 Using 2013 data, the GAO compared draft AMP-based FULs to NADACs, and found that in the aggregate, the two were within a few percentage points.  However, breaking the drugs out into brand and generic, but keeping the comparison in the aggregate, the GAO found that the generic draft AMP-based FULs were 19 percent higher than generic NADACs, and the brand draft AMP-based FULs were 26 percent lower than brand NADACs.3
GAO,2010 Using 2008 data, the GAO compared estimated AMP-based FULs with average retail pharmacy acquisition costs computed by IMS Health and found that acquisition costs were higher than AMP-based FULs for most of the studied drugs, and in the aggregate.4After revising their estimates in 2010 to reflect changes to AMP-based FUL calculations included in the Affordable Care Act, the GAO concluded that AMP-based FULs were at least 35 percent higher than pharmacies’ acquisition costs, in aggregate.5
OIG,2012 The OIG compared pharmacy invoice data with FULs using the current method based on published prices and the revised, AMP-based FULs yet to be implemented by CMS. Invoice prices were four times lower than FULs based on published prices, and about 43 percent lower than AMP-based FULs, in aggregate.6
A Fein,2011 Analysis of the draft AMP-based FULs published by CMS in 2011 indicated that AMP-based payments for generic drugs could be about 40 percent lower than current federal and state payment levels, but because generics are comparatively inexpensive, the impact is smaller when including dispensing fees.7 Another analysis by the same author indicated that AMP values vary considerably from month-to-month.8
OIG,2007 These findings are consistent with another analysis by the OIG, which found that 24 percent of AMP values fluctuated by more than 10 percent from quarter to quarter; AMPs for high-expenditure drugs and single-source drugs had the most frequent changes.9
OIG,2009 & 2010 These OIG analyses raised concerns about the accuracy and consistency of AMP values.10,11
State MAC Pricing OIG,2013 The OIG compared FULs to State Maximum Allowable Costs (state MACs) in a 2013 report, and found that FUL amounts using current methods based on published prices were almost twice the amount of state MAC prices, in aggregate. AMP-based FUL amounts were 22 percent lower than state MAC prices, in the aggregate. In addition, the OIG found that state MAC programs include 50-60 percent more drugs than FULs. Of 41 states that identified a pricing benchmark for their state MAC programs, 29 used pharmacy acquisition costs as part of the benchmark to set state MAC prices.12

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