The Eighth Circuit Court of Appeals upheld CMS' disapproval of a state plan amendment (SPA) to Iowa's Medicaid plan that would have changed the calculation of federal upper limits (FUL) on Medicaid payments for prescription drugs. The court ruled that the proposed SPA would violate both Soc. Sec. Act §1927(e) , and the implementing regulations.
Iowa first requested approval of this state plan amendment (SPA) in 2005. The proposed SPA made two major changes to the Iowa plan provisions regarding payment for prescription drugs: (1) eliminating the requirement for physician certification for a patient to receive the brand name version of a drug when a generic is available; and (2) setting the price for brand name drugs at the lower of estimated acquisition cost and the provider's usual and customary charge, eliminating the reference to the published FULs.
In response to questions from CMS, the Iowa agency stated that its approved drug list included brand name drugs, making physician certification unnecessary, and that after collection of manufacturers' rebates, the state's net payment for the brand name drugs would be lower than the cost of the generics. In 2007, CMS disapproved the proposed amendments on the grounds that the statute and 42 C.F.R. §447.332(b) require that the state's payments to the pharmacy for multiple source drugs be calculated with reference to the FUL, and do not permit consideration of anticipated rebates. Further, the statute also specifically requires the physician certification as a condition of payment for a brand name version of a multiple source drug
The court agreed. It rejected the state's argument that payment meant the agency's expenditures after subtracting rebates. The court noted that the term is used consistently throughout the statute and regulations to mean the amount paid to the pharmacy, and there was no reason to believe that Congress intended a different meaning. In addition, the court noted that CMS had rejected the state's position in the Final rule promulgated in July, 2007 (see ¶180,645 ). None of the comments in the rule reflected a change in the agency's interpretation of the term. CMS' denial of approval of the proposed SPA was affirmed.
Iowa Department of Human Services v. CMS, 8th Cir., Aug. 21, 2009, ¶302,957
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