AMCP Guide to Pharmaceutical Payment Methods

The methods by which the U.S. health care system pays for prescription drugs have been subject to much attention and increased scrutiny in recent years. In particular, ground-breaking legislation has been enacted and regulations implemented that have changed the basis for payment for prescription drugs in the Medicare and Medicaid programs, and a number of precedent-setting court cases are likely to result in further modifications to drug payment methods used by public and private payers. These developments will have significant implications for many stakeholders beyond public and private payers; they will affect consumers' access to drugs, payment to pharmacists and other providers of drugs, and spending for the health care system as a whole. Recent debate centers on determining the most appropriate basis for calculating how payers, including government, employers, and health plans, should pay pharmacists and other providers for drugs. Historically, payment for prescription drugs has been based on benchmark prices that do not necessarily reflect the actual acquisition costs paid by providers, primarily pharmacists, physicians and hospitals. This has led policymakers to believe that Medicare and Medicaid have paid more than is necessary for prescription drugs, contributing to excess spending in public programs. Thus, in an effort to reform the payment system and reduce drug expenditures, policymakers have made changes to the benchmarks used by public programs to pay for drugs. Private payers are beginning to follow their lead by changing their own payment methods and benchmarks. However, the drug purchasing and distribution system within the United States is highly complex and involves multiple transactions among myriad stakeholders, including drug manufacturers, distributors, third-party payers, pharmacists, physicians, and patients. Any change in payment methods or benchmarks has significant implications for all stakeholders, affecting the payments and prices to and from each of these groups. Knowledge of the intricate distribution and payment systems for prescription drugs is essential in order to ensure that payment reform results in desired outcomes such as fair and equitable payment to providers while avoiding unintended consequences such as reduced access to drugs. The Academy of Managed Care Pharmacy (AMCP) recognized the need to help stakeholders and policymakers better understand, evaluate and navigate the profound changes occurring in payment for prescription drugs in the United States. This AMCP Guide to Pharmaceutical Payment Methods offers a comprehensive examination of the methodologies and price benchmarks that have been used in the public and private sector to pay for pharmaceuticals in the U.S., the changes that have occurred or are likely to occur in the future, and the forces that are behind these changes. AMCP has made every effort to make the Guide an unbiased presentation of information, issues, and implications.