Survey of Retail Community Pharmacy Invoice Prices

Dear Pharmacy Owner / Manager:
As you are aware, changes in the availability of drug pricing benchmarks necessitate that many
State Medicaid programs evaluate alternative pricing methods for use in reimbursing pharmacies
for drugs that they dispense. Because of these changes, we have the unique opportunity to work
together to recognize the contributions pharmacists make to the health of Medicaid recipients
through the realignment of drug ingredient reimbursement for estimating pharmacy’s acquisition
costs, and the provision of reasonable Medicaid dispensing fees that consider professional
services performed by pharmacists.
The Centers for Medicare and Medicaid Services (CMS) is working with State Medicaid
programs, with input from national pharmacy associations and many other stakeholders,
regarding the design and development of a National Average Drug Acquisition Cost (NADAC)
reference file. We expect that the NADAC reference file will represent a new pricing benchmark
based on the national average costs that pharmacies pay to acquire Medicaid covered outpatient
drugs. This pricing benchmark will be based on drug acquisition costs collected directly from
pharmacies through a nationwide survey process. This survey will be conducted on a monthly
basis to ensure that the NADAC reference file remains current and up-to-date.
CMS envisions that the NADAC reference file will provide State Medicaid agencies with an
additional pricing reference which they can use to evaluate their current drug reimbursement
methodologies. If a Medicaid program chooses to utilize the NADAC reference file for drug
ingredient reimbursement, we expect that States will simultaneously evaluate their Medicaid
dispensing fee.
One of the primary goals of this program is to create and maintain an up-to-date NADAC
reference list for Medicaid covered outpatient drugs reflecting the average price paid for drugs
by retail community pharmacies, chain pharmacies, and specialty pharmacies. The drug
acquisition cost survey process has been designed to minimize the administrative burdens on
pharmacies that participate and to streamline the process of obtaining drug cost data from
pharmacies.
CMS has contracted with Myers and Stauffer LC, a national certified public accounting firm that
provides professional accounting, consulting, data management and analysis services to
government-sponsored healthcare programs. Myers and Stauffer has extensive experience
working with State Medicaid pharmacy programs and collecting acquisition costs directly from
pharmacies. Under this CMS contract, Myers and Stauffer has developed a methodology for
collecting drug acquisition costs and calculating the NADAC reference file prices for covered
outpatient drugs.
A meeting with stakeholders was held on August 4, 2011 at the CMS offices in Baltimore,
during which the proposed methodology for the NADAC was presented. Since that meeting,
further stakeholder input has been received and considered in the final design and development
of the drug acquisition cost survey and NADAC reference file initiative. Additional information
and routine updates will be available from the http://Medicaid.gov website.

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Your pharmacy has been randomly selected to participate in this month’s survey. We are
requesting that you provide a copy of selected purchase invoices for drugs purchased by your
pharmacy. The attached survey instructions prepared by Myers and Stauffer outlines the survey
process for submitting one (1) month’s worth of drug invoices by fax, mail, or electronic
submission. Since 2,000 to 2,500 pharmacies nationwide are randomly selected to participate in
the survey each month, the probability that your pharmacy will be selected again during the year
is 5% or less. Based on the contractor’s experience, it is estimated to take less than 30 minutes of
non-pharmacist time to assemble and submit the requested information.
It is important to note that all drug purchase price information submitted for this project will
remain under the control of CMS, will only be used for the purposes described above, and will
remain secure to the extent provided by law, consistent with Exemption 4 of the Freedom of
Information Act (FOIA). Accordingly, neither CMS nor Myers and Stauffer will release invoice
information and pharmacy identification that is submitted voluntarily and is identified by you as
proprietary, except as is required by law.
By participating in the survey, you will have the opportunity to ensure that the market conditions
facing your pharmacy are represented in the calculation and evaluation of the NADAC. One of
the goals of the NADAC program is to account for the prices that pharmacies pay to acquire
drugs.
To accomplish this goal, information from your pharmacy is necessary. Your participation in
this endeavor is strongly encouraged and greatly appreciated.
This Retail Price Survey represents an opportunity for Medicaid pharmacies to participate in an
initiative to determine a reference price representing the acquisition cost of drugs. Please note
that current Federal regulations require State Medicaid programs to consider the professional
services performed when setting their dispensing fee rates.
Please contact the Help Desk operated by Myers and Stauffer LC at (800) 591-1183 should you
have any questions regarding this survey.
Sincerely,

Barbara Coulter Edwards
Director, Disabled and Elderly Health Programs Group
Center for Medicaid and CHIP Services