The Centers for Medicare & Medicaid Services (CMS) announced on November 27, 2013 that the new Federal Upper Limit (FUL) for multi-source generic drugs will be finalized in July 2014.  The new FUL is at least 175% of weighted Average Manufacturer Price (AMP) for multi-source products with at least two A-rated generics available to retail pharmacies nationwide.  This is a significant change from the previous FUL calculation (150% of the lowest Wholesale Acquisition Cost [WAC]).  The new FUL is expected to decrease prices for most drugs while a select few drugs may see FUL increases.

Many states have implemented their own Maximum Allowable Cost (MAC) list (also known as SMAC) for Medicaid to achieve savings greater than the previous FUL.  If the state uses a SMAC list, a review and adjustment may be required to comply with the new FUL.  The SMAC list must deliver the same or more savings to the state when compared to the new FUL.

States may also use the National Average Drug Acquisition Cost (NADAC) similar to the AAC implementation in Alabama, Oregon, and other states.  If States decide to use NADAC pricing, they must submit state plan amendments (SPAs) to CMS to clarify and gain approval to update their pharmacy reimbursement methodology.

PHSI constantly works with payers, pharmacies, and pharmaceutical manufacturers to explain how FUL and NADAC impact each organization.  Do not delay in preparing for these changes.  It will be important to monitor your state(s) to determine if they will be adjusting the SMAC list or changing to NADAC as the basis for reimbursement.