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August Legislative Update: OH's Biennial Budget, Medicaid OTC Billing

State Legislative Update: 

Ohio's Biennial Budget

On Monday, July 13, the Ohio legislature passed HB 1 the biennial state budget.  This bill was signed by Governor Strickland July 17. Along with some things that we think are good for pharmacy such as the elimination of the Best Rx Program, we are facing a major decrease in the dispensing fee.

 Two weeks before the budget vote, OPA learned that the Governor, as part of his "Balanced Budget Framework," proposed to reduce the Medicaid fee-for-service dispensing fee by more than half, from the current $3.70 down to $1.80.  The Medicaid Department indicated that the dispensing fees being paid by managed care are $1.80 or less, which was their reasoning in cutting the fee.  OPA has pointed out that Ohio Medicaid only updates the prices for medications once per month, whereas managed care updates either nightly or weekly.  Second, most managed care contracts are based on AWP (average wholesale price), whereas Medicaid fee-for-service is based on WAC (wholesale acquisition cost), which is a lower reimbursement figure.  Therefore, it is inappropriate for Medicaid to cut the fee-for-service fee to the $1.80 fee.

 OPA made it clear that Ohio pharmacies incur a cost of approximately $11 to fill each prescription.    The federal government requires the state to pay a "reasonable" fee that approximates the cost to fill a prescription.  Medicaid's own survey from 2005 indicated a cost of over $9 per prescription.  The $3.70 fee did not cover the costs, but pharmacies had been able to purchase well enough to make up the difference.  In the past few years, it has been clear that the reimbursement levels are low enough to cause pharmacy closures.  Ohio has dropped from 1200 independents and small chain pharmacies to fewer than 600 today.  These pharmacies provide critical access to health care in many of our small towns and rural areas, and also provide good jobs in towns where jobs are disappearing. 

Because the pharmacy dispensing fee is set in Ohio Administrative Code and not in statute, it is a decision the Governor can make unilaterally.  OPA contacted the Governor's office, as well as the Office of Medicaid, to inform them of the consequences of this action and to offer other more reasonable ways of saving the State money.   OPA contacted members of the Finance Committee in both the House and Senate, and testified before the House Finance Committee.  Unfortunately, none of our suggestions were taken, and when the legislature voted on the budget bill, the $21 million projected savings from the fee cut was in the bill.

 According to an email we received from ODJFS (Ohio Department of Job and Family Services), the change in the dispensing fee will not take place until January 1, 2010.  While the news of the dispensing fee decrease is not good, the six-month delay in implementation does give us time to try to work on a fix.

 OPA and other pharmacy interests, that we are working with, have identified several strategies that we will investigate to try to mitigate this situation.  We will work with key legislators in determining a legislative fix for this issue in the corrective budget that is expected this fall.  We will be meeting with the Governor's office as well as legislators to address how this drastic cut will affect pharmacies in their specific districts in terms of jobs, income, and very possibly additional pharmacy closures because of this action. 

By federal law, Ohio Medicaid must submit a state plan amendment detailing their reason for seeking a decrease in the dispensing fee.  This state plan amendment may be approved or disapproved by CMS. OPA will be submitting information on how this change will damage our pharmacies.

 This has been a very difficult time and an unusual budget process given the two interim budgets, the poor economic state of Ohio and the growing demands on our state's resources to balance the budget.  We are grateful for the quick action of our members on the VoterVoice legislative alerts OPA sent out, as well as those who took action after receiving the phone call from pharmacist and State Representative Dave Burke.  I think it is worth noting that the Governor and legislature received almost 1000 emails from concerned pharmacists detailing the devastating effect that this decrease will have on pharmacy in Ohio.

 OPA is committed to continuing to fight against this unreasonable dispensing fee cut, and to help the Governor's office understand the ramifications of these cuts.  We hope that you will continue to share your thoughts with your legislators and the Governor.  Be SURE to specifically discuss what impact this cut will have on your pharmacy, what the loss of your pharmacy would mean to your community and your patients, and discuss your value in the health care that you provide in your community.  Thanks for your help.

Medicaid OTC Billing in Nursing Facilities

HB 1 also changes the way selected over-the-counter (OTC) drugs should be billed to Medicaid for residents of nursing facilities (NF).  Effective July 17, 2009, coverage responsibility for these drugs will be included in the NF's per diem rate, and can no longer be billed directly to Medicaid for payment. Please note that this applies only to residents of nursing facilities, and not to residents of intermediate care facilities for the mentally retarded (ICF-MR).

The OTC drugs that are no longer separately billable to Medicaid when prescribed for a consumer who resides in a nursing facility are those that are classified into one of the following drug classes:

a) Analgesics, including urinary analgesics;
b) Compounding vehicles and bulk chemicals;
c) Cough and cold preparations and antihistamines, except cetirizine and loratadine;
d) Ear preparations;
e) Gastrointestinal agents, except histamine-2 receptor antagonists, proton pump inhibitors, and loperamide;
f) Hemorrhoidal preparations;
g) Nasal preparations;
h) Ophthalmic agents, except antihistamines;
i) Saliva substitutes;
j) Sedatives;
k) Topical agents, except antifungals and acne preparations; or
l) Vitamins and minerals, except prenatal vitamins and fluoride.

For additional information about the Ohio Medicaid pharmacy program, please visit the ODJFS web site at

If you have any questions or comments about the issues mentioned in this article, please contact Kelly Vyzral, Director of Government Affairs, at 614.586.1497 or

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