Regarding the Department of Medical Assistance Services (DMAS) decision to implement a National Average Drug Acquisition Cost (NADAC) and increased professional dispensing fee to replace the current estimated acquisition cost (EAC) and nominal dispensing fee system: I am expressing my concern toward the period of time used to collect data confirming the economic impact of this regulatory action.

I understand that the choice to implement a NADAC and $10.65 dispensing fee to replace the EAC and $3.75 dispensing fee has been proposed to make Virginia Medicaid fee-for-service prescription drug pricing methodology compliant with Federal regulations. Recent studies have shown that NADAC can decrease expected reimbursement rates by staggering amounts, and it is appropriate that dispensing fees are raised to meet actual labor costs to offset these differences for independent pharmacies. However, I have concerns that the most recent 9 months or prior pharmacy claims using a spread of dispensing fees ranging from $10 to $10.75 analyzed by DMAS may not be adequate to predict the effect of long-term pharmaceutical market volatility. Observing analysis of similar NADAC implementation plans in other states, and seeing differences in policy and economic impact outcomes, it seems that such a small frame of data collection may be misleading.

Analyses in Virginia outline no expected economic impact of significant difference for the state or small businesses. The current fiscal impact on the state in Maryland of implementing similar increased dispensing fees its expected to cause a net loss for the state of about $1M. In Pennsylvania, the initial expected raise in dispensing fees was only up to $7, and without the alternative of using the wholesale acquisition cost (WAC) that many states are using if no NADAC can be determined. This lack of alignment in policy approach and impact analysis to a seemingly shared issue is concerning, especially since the NADAC uses national averages that seem they would not be distinctly different between states. For the state’s sake, will the economic impact be able to remain neutral in a period of extreme price growth and unexpected increase in usage of expensive specialty drugs? It may seem to be fiscally neutral right now to pay over $10 for dispensing fees, but any rapid increase in market cost undermining expected NADAC cost models could be unsustainable for the state to pay for both. As specialty products like biologics become more and more utilized, as current trends predict, the burden of higher priced items being the norm might cause a hefty weight on this proposed system. In a market benchmarked to the NADAC pricing index, manufacturers could provide retail incentives without lowering NADAC prices, causing them to be higher than the average manufacturers price (AMP) for high value products. In an increasingly high-price specialty drug market, NADAC could rapidly become a less accurate reflection of a pharmacies’ acquisition costs and could mitigate the effect NADAC has on generic dispensing. Can the state

Additionally, the surveying used to recognize prices and set a NADAC is suspect in its ability to keep up in the case of changing market conditions. NADAC pricing, from voluntary pharmacy surveys, typically lags two months behind and does not include rebates and discounts. As a result of this delay, any reimbursement rates that are based on the reported NADAC could be inappropriately low during the lag period and could harm patients’ access to needed therapies. I am not convinced that the NADAC will be held to account for price fluctuations in a timely manner. In only a nine month period, it is unlikely that the data collection process could have accounted for a significant number of these instances of survey lag and assessed their impact.