Review of Pharmacy Acquisition Costs for Drugs Reimbursed Under the Medicaid Prescription Drug Program of the North Carolina Department of Human Resources

This review, requested by the Health Care Financing Administration, was made 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 on average, generally discounts the AWP by about 10.5 percent. This review was made in 11 States. This final report discloses results in North Carolina. In North Carolina the overall estimate of the extent that AWP exceeded pharmacy purchase invoice prices was 16.9 percent for brand names drugs and 45.2 percent for generic drugs. We believe that the difference 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 North Carolina. The State concurred and stated that the report will be of great use in the State agency's next review of the drug program.