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Kentucky Pharmacists, Fletcher Administration Officials Reach Agreement; Market-driven Solution Eases Concerns of Pharmacists

Press Release Date:  February 16, 2005
Contact:  Gwenda Bond or Doug Hogan
(502) 564-6786

            Fletcher administration officials and pharmacists reached an agreement yesterday on Kentucky Medicaid regulations related to pharmaceutical reimbursements. The agreement reduces concerns recently expressed by some pharmacists while yielding long-term Medicaid savings through the increased utilization of generic drugs.

  Governor Ernie Fletcher said, “I am pleased we have been able to partner with Kentucky’s pharmacists as we work to reform and improve Kentucky’s Medicaid program. We inherited a broken Medicaid system that threatens to consume the state budget. Only through hard work and cooperation with groups such as the pharmacists can we hope to solve Kentucky’s Medicaid crisis.”

  The agreement provides a financial incentive for pharmacists to dispense generic rather than brand name drugs by raising the dispensing fee paid to pharmacists by Medicaid to $5 from $4.51 for generic drugs. The increased payment also reflects the efforts of Kentucky pharmacists in implementing Medicaid’s “three brand allowance,” a component of cost-containment measures announced last month that will also incentivize the use of generic pharmaceuticals.

  In addition, the plan calls for changes to the pricing scheme used by pharmaceutical manufacturers to establish prescription drug prices, known as the “Average Wholesale Price” (AWP). Emergency regulations filed by the Cabinet for Health and Family Services in January called for payments of 16 percent below AWP for both generic and brand name drugs. Last night’s agreement further encourages the use of generic drugs through reimbursement rates set at 14 percent below AWP for generics, compared to 15 percent below AWP for brand name drugs. Previously, Medicaid reimbursed all prescription drugs at 12 percent below AWP.

  Cabinet for Health and Family Services’ Mark D. Birdwhistell, Undersecretary for Health, said, “These changes will allow us to deliver more efficient pharmaceutical care at a better value for Kentucky’s taxpayers. Meanwhile, no Medicaid member will be denied access to life-sustaining and enhancing drugs. This will help address Kentucky’s Medicaid crisis through good business practices, rather than by cutting eligibility or services.”
Rep. Jimmie Lee (D-Elizabethtown) applauded administration officials and pharmacists for working together to reach this agreement. “Tough steps must be taken for Kentucky to continue providing the services needed by our vulnerable populations. When the Governor and providers can get together to hammer out a solution that makes sense for both sides all Kentuckians benefit.”

  The changes announced today will take effect by the end of this week. They represent the most recent administration efforts to balance the Medicaid shortfall, estimated at $526 million in December for FY 2005. Through efficiency and cost-savings measures, that amount has been reduced to roughly $120 million.

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Last Updated 2/18/2005