Update on Medi-Cal Reimbursement Cuts
Last week, the coalition of provider groups that has been challenging the 10% cut to Medi-Cal reimbursements filed a petition for a writ of certiorari, formally requesting a review of the case by the U.S. Supreme Court. As many of you know, CPhA joined forces with the California Hospital Association, the California Medical Association, the California Dental Association, the National Association of Chain Drug Stores, and others to challenge the drastic cuts. That action resulted in an injunction being placed on the cuts, preventing the state from implementing them. Earlier this year, however, the Ninth Circuit Court of Appeals overturned previous decisions and removed the injunction. The Ninth Circuit's actions opened the door for the state to begin implementing payment reductions. Since that time, CPhA has been pursuing every opportunity to prevent or reduce the impact of the cuts. This petition to the U.S. Supreme Court does not guarantee a hearing, and while this petition is pending we will continue to fight the cuts at both the state and federal levels.
Part of CPhA's efforts to stop or reduce the cuts has included work with the California Department of Health Care Services (DHCS), which administers the Medi-Cal program, and the federal Centers for Medicare and Medicaid Services (CMS). After DHCS received approval for the 10% cuts, a second State Plan Amendment (SPA) was submitted to CMS seeking approval for flexibility in implementing the cuts in the event that access problems occur. DHCS has been in negotiations with CMS over approval of this SPA for over a year. CPhA recognizes that the "flexibility SPA" was intended to reduce the impact of the cuts on pharmacies, thereby attempting to prevent the access problems that will occur if a full 10% cut is implemented. CPhA originally sent a letter to CMS opposing the SPA for a number of reasons, including lack of transparency and predictability for pharmacies, and that reimbursement for some drugs could be cut by less than 10% but other drugs could be cut by more than 10%. We have subsequently had conversations with DHCS regarding changes to the SPA intended to provide pharmacies with more predictability and prevent access problems among high-cost specialty drugs. However, after carefully reviewing what we understood to be in the proposal, CPhA continued to have a number of concerns with approval of the SPA. CPhA sent a second letter (click here to view the letter) to CMS outlining all of our concerns and asking CMS to reverse the approval of the 10% cuts altogether.
In addition, CPhA continues to work with other stakeholders in exploring potential legislative solutions to repeal or significantly reduce the scope of the Medi-Cal reimbursement cuts. There is increasing recognition of the fact that cutting drug product reimbursement by 10% will result in access problems for Medi-Cal beneficiaries, as CPhA has long argued.
Congress Reaches Deal on Compounding and "Track & Trace" Legislation
Two issues related to the pharmacy practice that Congress has been working on for some time now have an end in sight. Following the catastrophic events associated with unsafe compounded products from the New England Compounding Center (NECC) in October of 2012, Congress has been seeking to increase regulation by the FDA over compounding. Legislation was introduced (S.959) that most traditional compounding pharmacists opposed. Separately, Congress has for years been working on a federal-level "track and trace" program as a nation-wide alternative to California's e-pedigree requirements. Two bills were introduced this year in Congress to establish such a program. Earlier this week, a bipartisan deal was announced between House and Senate negotiators on both issues. The details of the deal were distributed yesterday and CPhA has been hard at work analyzing the impact on pharmacists and pharmacies. Titled The Drug Quality and Security Act (the Act), the deal generally represents an improvement from prior legislation with regard to both issues.
Track and Trace: The Act establishes a national system for tracing drug products through the supply chain and sets national licensing standards for wholesale distributors and third-party logistics providers. Most significant to California pharmacists, the Act specifically preempts all state laws, regulations, and requirements for tracing products through the supply chain, including any recordkeeping and pedigree requirements, including California's e-pedigree law. The Act requires manufacturers, wholesale distributors, dispensers, and repackagers to pass, capture, and maintain certain information with respect to each transaction. Traceability requirements begin for products at the lot level in 2015; manufacturers, wholesaler distributors, and repackagers must comply on January 1, 2015 and pharmacies must comply by July 1, 2015. Records can be held electronically or on paper in 2015, and beginning 2019, manufacturers will be required to pass information electronically. Beginning in 2025, all supply chain members will be required to electronically track and trace product at the individual package level. The second major area of the Act related to supply chain security requires the federal government to establish uniform national wholesaler and third-party logistics provider licensing standards that all state licensing boards will be required to follow.
Compounding: Under the Act, most compounding pharmacies will not be affected by the changes in the Act and will be able to continue to operate as they have been. Food Drug and Cosmetic Act (FD&C) section 503A related to compounded drugs remains intact and pharmacies will be able to continue to compound under that section. The Act creates a new section regulating what it calls "outsourcing facilities." These are facilities that perform sterile compounding by or under the direct supervision of a pharmacist. Like compounding pharmacies, outsourcing facilities would be exempt from being considered a manufacturer of a drug. The Act establishes a number of restrictions and requirements, including inspection and annual registration requirements, on outsourcing facilities. Compounding pharmacies can elect to be registered as an outsourcing facility, but are not required to do so. The main advantage of registering as an outsourcing facility will be for large compounding pharmacies that ship products (such as NECC), as the Act creates predictable, risk-based inspection procedures and other standards for compliance. Most traditional compounding pharmacies will not register as outsourcing facilities.
This legislation (H.R.3204) is expected to be voted on in Congress as early as this weekend. CPhA will keep pharmacists informed as the matter develops. Additionally, we will provide more detailed information in the future.