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Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Pharmacy Acquisition Costs for Drugs Reimbursed Under the Medicaid Prescription Drug Program for the Montana Department of Public Health and Human Services," (A-06-95-00068)

July 11, 1996

Complete Text of Report is available in PDF format (283 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


The purpose of this review, part of a nationwide audit of pharmacy drug acquisition costs requested by the Health Care Financing Administration, was to develop an estimate of the difference between the actual acquisition costs of drugs of the dispensing pharmacy and the average wholesale price (AWP) used by States in helping establish drug reimbursement amounts. Most States reimburse pharmacies for Medicaid prescriptions using a formula which generally discounts the AWP by 10.5 percent. This review was made in 11 States. This final report discloses results in Montana. In Montana the overall estimate of the extent that AWP exceeded pharmacy purchase invoice prices was 16.2 percent for brand names drugs and 48.5 percent for generic drugs. We believe that the differences between AWP and pharmacy acquisition costs as determined by our review are significant enough to warrant consideration by the State in any evaluation of the drug program. Therefore, we recommended that the State agency consider the results of our review in determining any future changes to pharmacy reimbursement for Medicaid drugs in Montana.