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CurrentAlaska MedicaidPolicy N/A

Alaska Pharmacy Cost of Dispensing Survey — Methodology and Considerations for Setting Professional Dispensing Fees

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Documents the methodology, results, and considerations from a statewide survey of pharmacies to estimate the average cost of dispensing Medicaid prescriptions in Alaska and options for setting professional dispensing fees; affects Alaska Medicaid-enrolled pharmacies (I/T/U and non-I/T/U).

Policy Summary

PayerAlaska Medicaid

PolicyPharmacy Cost of Dispensing Survey — Methodology and Considerations for Professional Dispensing Fees

Policy CodePolicy N/A

Change TypeInformational survey report

Effective Date

Next Review Date

Key ActionAll Alaska Medicaid–enrolled pharmacies must complete and return the cost of dispensing survey (electronic or paper) by the stated return date to avoid potential fee reduction to $3.45.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

119pharmacies enrolled and surveyed

117 (99.2%)usable surveys / response rate

$14.41weighted mean cost (non-I/T/U)

$28.66weighted mean cost (I/T/U)

$3.45penalty dispensing fee if non-participation

Coverage Criteria and Survey Rules

Fee design considerations

Considerations for structuring professional dispensing fees based on survey results:

States must base proposed changes to professional dispensing fees on adequate cost-based data (e.g., state or national survey); market-based research alone is not acceptable.

Options

Single statewide fee — simplest option and widely used among states; may not reflect cost differences across pharmacy types.
Distinguish by I/T/U affiliation — survey shows significant cost differences between I/T/U and non-I/T/U pharmacies supporting separate fees.
Volume-based tiers — tiered fees by annual prescription volume reflect cost variation by volume but require ongoing volume monitoring to reassess tier assignment.

Policy Summary

PayerAlaska Medicaid

PolicyPharmacy Cost of Dispensing Survey — Methodology and Considerations for Professional Dispensing Fees

Policy CodePolicy N/A

Change TypeInformational survey report

Effective Date

Next Review Date

Key ActionAll Alaska Medicaid–enrolled pharmacies must complete and return the cost of dispensing survey (electronic or paper) by the stated return date to avoid potential fee reduction to $3.45.

SourceLink

On This Page

Cost calculation and adjustment criteria

Methods and rules used to determine allowable dispensing-related costs and per-prescription dispensing cost used for fee-setting

Total dispensing-related cost is calculated as allocated overhead plus allocated labor divided by total prescriptions dispensed; cost-finding rules isolate prescription-related costs from other business activities.

Overhead allocation methods: 100% (fully prescription-related), 0% (not prescription-related), sales ratio (prescription sales/total sales), or area ratio (prescription floor space/total floor space with area ratio multiplied by 2.0 and capped at the sales ratio); certain items (e.g., prescription licenses, prescription delivery, containers/labels) treated as fully prescription-related; income taxes, bad debts, advertising and unrelated 'other' expenses excluded or allocated appropriately.

Reasonableness limits: corporate/indirect allocations limited (corporate allocations described and must disclose allocation basis); corporate allocations to individual locations are evaluated and may be constrained; shipping reimbursements received from Medicaid were annualized and offset from calculated dispensing cost for applicable pharmacies.

Labor allocation: allocate total salaries, payroll taxes, and benefits by percent of time in the prescription department; employee pharmacist prescription-time is adjusted upward using a specified formula to reflect higher productivity in prescription duties; an overall labor constraint was applied to limit prescription labor proportion (applied to a subset of pharmacies and reduced mean cost modestly).

Owner compensation limits: owner salaries/benefits constrained between upper and lower hourly thresholds approximating the 95th and 40th percentiles of employee wages (separate limits for pharmacist and non-pharmacist owners); amounts outside limits are adjusted to the limit.

Inflation adjustment: all allocated overhead and labor costs are multiplied by inflation factors (sourced from the BLS Employment Cost Index with interpolation) to normalize costs to the reference point (midpoint 12/31/2023) for fiscal year ending 6/30/2024.

Statistical presentation: present unweighted and weighted means and medians (weighting by total Rx volume or Medicaid Rx volume); use weighting to mitigate outliers and emphasize high-volume dispensing patterns in reimbursement consideration.

Reporting and reconciliation requirements

Report overhead and labor expenses using specified tax form line mappings and designated survey line items; reconcile survey totals to financial statements or tax returns for the same fiscal year.

Round all reported amounts to the nearest dollar or whole number.

Report specified expense categories on designated survey lines (e.g., rent - building/equipment, repairs & maintenance, insurance, interest, legal/professional fees, dues/publications, bad debts, utilities, office supplies, advertising/marketing, computer expenses, prescription delivery, containers/labels, travel/meals, security, bank charges, credit card processing fees, interior/exterior maintenance, licenses/permits, employee training, continuing education).

Use lines 32a–32r to report other non-labor expenses, provide descriptions and allocation basis for corporate/indirect allocations, and attach additional pages as needed; include examples of corporate allocation descriptions and bases.

Total overhead for Page 8 is line (31) (sum of lines 1–30); continue overhead on Page 9 through line (33) where applicable.

Complete reconciliation on Page 10 to ensure cost survey totals equal totals per financial statements or tax returns for the same fiscal year; when using tax forms, map total expense lines from 2023 forms to survey reconciliation lines.

If using tax returns, map tax form lines as noted (e.g., 2023: Form 1040 Schedule C other expenses; Form 1065 line 21; Form 1120 line 27; Form 1120S line 20) and provide detailed breakdowns for 'other expenses' where applicable.

Provide supporting details for 'other expenses' and ensure column totals in the reconciliation (add Lines 1 to 8e) are equal; include any items on financial statements/tax returns not on the cost survey with explanation.

Myers and Stauffer (contracted firm) will review submissions, provide contact support, and use survey results to inform reimbursement methodology under federal regulation; participation and accuracy are required.

Non-participation or failure to submit accurate information may result in sanctions, including reduction of dispensing fee per state regulation.

Cost Metrics, Tables and Coding

Survey summary cost statisticsmixed

Weighted mean non-I/T/U	$14.41 weighted mean cost per prescription (non-I/T/U)
Weighted mean I/T/U	$28.66 weighted mean cost per prescription (I/T/U)
Unweighted mean non-I/T/U	$18.14 unweighted mean cost per prescription (non-I/T/U)
Unweighted mean I/T/U	$35.53 unweighted mean cost per prescription (I/T/U)

Cost metrics reportedmixed

Weighted median	Weighted median dispensing cost per prescription reported for pharmacy groups
Unweighted mean	Unweighted average dispensing cost per prescription reported for pharmacy groups

Survey reporting (non-billable data)mixed

Product/service counts and sales

No explicit billing codes; report number of prescriptions and dollar sales by product categories (infusion, TPN, clotting factors, prefilled, orals, topicals, injectables, compounded, enteral, other) and percent dispensed to health care professional/clinic

Tax return line mappings for total expensesmixed

1040C line 28; 1065 line 21; 1120 line 27; 1120S line 20

Tax form lines referenced for total expenses per tax return (2023 forms) when used to complete the cost of dispensing survey

Not applicablemixed

No codes listed

Per-pharmacy dispensing cost valuesmixed

Dispensing Cost per Prescription (store-level)

Per-pharmacy calculated dispensing cost per prescription as reported in exhibit tables (original and revised values shown per store)

Dispensing cost statisticsmixed

Statistical summary values

Summary statistics (means, medians, weighted means) for dispensing cost per prescription by pharmacy grouping (chain vs independent, on/off road, volume buckets)

cost metrics and service prevalencemixed

No codes listed

Not applicablemixed

No codes listed

On-road vs Off-road weighted median (non-I/T/U)

On-road weighted median (non-I/T/U)$11.80

Off-road weighted median (non-I/T/U)$22.17

Non-I/T/U sample sizes (on/off road)On-road n=78; Off-road n=15

Typical dispensing cost range (majority)

Typical dispensing cost range for majority of pharmacies$9 - $29 (approximately 70% of pharmacies)

Non-I/T/U weighted mean$14.41

Unweighted mean (non-I/T/U)$18.14

FTE rounding and total percent time

FTE roundingFTE = total weekly hours ÷ 40; round to nearest tenth

Percent-time column requirementEach percent-of-time row (columns A–D) must total 100%

FTE exampleExample: (38+22+16) ÷ 40 = 1.9 FTEs

Rounding rule

Rounding rule for survey amountsRound all amounts to the nearest dollar or whole number

Apply rounding to overhead and other expense linesPage 8 and related tax-return mapped lines must be rounded to nearest dollar

Consistent rounding across formsRound amounts reported on tax forms and survey pages to nearest whole dollar

Per-location reporting requirement

Per-location submission requirementSubmit a completed survey for each pharmacy location participating in Alaska Medicaid

Chains must provide per-store dataChains must submit one survey per store/location and may use the Excel template

I/T/U instructionsI/T/U organizations must submit a survey for each pharmacy location with allocation guidance for organization-level costs

Professional dispensing fee reduction threshold

Penalty triggering reduced dispensing feeProvider's professional dispensing fee may be reduced to $3.45 until a completed survey is submitted

Regulatory basisSanctions per 7 AAC 145.410(c) and related Alaska Medicaid regulations

Encouragement to submit promptlyForms must be returned by April 9, 2024 (extended to April 16, 2024 for representation) to avoid penalties

High annual volume category

High annual volume category70,000+ prescriptions/year

Mean dispensing cost for 70,000+ bucket (non-I/T/U)Approximately $11.21 (mean)

Average total prescriptions in bucketAverage total prescriptions ≈ 99,831 for 70,000+ group

I/T/U pharmacies - Medicaid-weighted mean dispensing cost

I/T/U Medicaid-weighted mean dispensing cost$28.66

I/T/U unweighted mean$35.53

I/T/U median (weighted by Medicaid volume)$26.81

Provider Actions, Submission Instructions, and Penalties

Prior Authorization

Use cost‑based survey data to support fee changes (CMS guidance)

CMS requires that proposed changes to professional dispensing fees be supported by adequate cost-based data (for example, a state or national survey); market-based research or third‑party payment data alone do not qualify as supporting data.

Documentation Required

Provide supporting documentation for adjustments and shipping offsets

Pharmacies that received Medicaid shipping reimbursement had annualized shipping reimbursements offset against their calculated dispensing cost; a random sample of 21 pharmacies were asked to provide supporting documentation and all complied.

Documentation Required

Complete and return the cost survey by the deadline

Complete and return the Alaska Medicaid Pharmacy Cost of Dispensing Survey by the stated return date; contact Myers and Stauffer for the electronic template or assistance via the provided phone/email.

Return completed survey by April 9, 2024 (deadline stated on the form).
Request electronic Excel version from disp_survey@mslc.com or 1-800-374-6858.

Documentation Required

Declare exemption if new or changed ownership (<6 months)

If the pharmacy was open less than six months during the reporting period or experienced a change in ownership resulting in less than six months in business, the pharmacy may check the Declaration of Exemption and is not required to complete the remainder of the survey.

Enter the date the pharmacy opened or the date ownership changed on the form.
Contact Myers and Stauffer at 1-800-374-6858 or disp_survey@mslc.com with questions.

Documentation Required

Report product breakdown and reconcile totals to Section IA

Report the number of prescriptions and dollar sales by specialty and non‑specialty categories and ensure those totals reconcile to Section IA prescriptions and pharmacy department sales; report percent dispensed to health‑care professional/clinic for administration for each category.

Provide counts and dollar sales for each specialty product category (infusion, TPN, clotting factors, prefilled, orals, topicals, injectables, compounded, enteral, other).
Ensure product totals reconcile to Section IA prescriptions and sales.

Documentation Required

Describe specialty services and programs in narrative section

Provide a narrative description of specialty products and related services, including patient monitoring, compliance programs, case/disease management, specialized equipment, and REMS‑related activities.

Describe monitoring, compliance, case management, specialized storage/equipment and REMS activities as applicable.

Denial Risk

Mandatory participation — non‑response may trigger fee reduction

All Alaska Medicaid enrolled pharmacies supplied a survey must participate; failure to participate may result in reducing the provider's dispensing fee to $3.45 or other sanctions under state regulation.

Participation is mandatory per 7 AAC 105.400(27) and related regulations.
Non‑participation may trigger fee reduction to $3.45 per 7 AAC 145.410(c).

Documentation Required

Independent pharmacies: submit survey and optional financials/tax return

Complete the enclosed survey for each single‑store pharmacy; you may submit store financial statements or a federal tax return if you elect to have Myers and Stauffer complete specified overhead and reconciliation sections; retain a copy of the completed survey for your records.

If submitting financials/tax return for a single store, Myers and Stauffer will complete Section IIB and Section III for you.
Retain a copy of the completed survey.

Documentation Required

Chains: submit a completed survey for each store (per‑store reporting)

Submit a completed survey for each store/location participating in Alaska Medicaid; chains must submit per‑store data and may use the Excel template provided.

Each store must submit its own survey form and supporting information.
Chains are encouraged to use the electronic Excel template.

Documentation Required

I/T/U pharmacies: submit per‑location surveys and allocate org costs

I/T/U organizations must submit a survey for each pharmacy location; guidance is provided for allocating organization‑level costs to individual pharmacy operations.

Submit per‑location survey data even if part of an I/T/U organization.
Use the provided guidance to allocate organization‑level costs to each pharmacy.

Billing Rule

Submit survey electronically using the Excel template (email or Secure FTP)

Electronic submission is encouraged via the Excel template; obtain the template from disp_survey@mslc.com and submit completed electronic surveys by email or via Secure FTP when provided.

Request the Excel spreadsheet from disp_survey@mslc.com or call 1-800-374-6858.
Email completed Excel survey files to disp_survey@mslc.com or use Secure FTP if arranged.

Billing Rule

Paper submission: mail each store's survey using the Business Reply Envelope

Paper submission is allowed—send completed paper forms (one per store) to Myers and Stauffer LC at the Kansas City Business Reply address; postage is prepaid.

Mail to: Myers and Stauffer LC, Attn: Alaska Medicaid Pharmacy Cost of Dispensing Survey, 700 W. 47th Street, Suite 1100, Kansas City, MO 64112.
Use the enclosed Business Reply Envelope; postage will be paid by Myers and Stauffer LC.

Denial Risk

Survey validation — selected providers will be asked for follow‑up documentation

All submitted surveys will be reviewed and validated; a random sample will be selected for further validation and providers will be notified and asked to provide supporting documentation if selected.

Myers and Stauffer will notify pharmacies selected for additional validation and specify required documentation.
Submitted materials remain strictly confidential.

Prior Authorization

Mandatory participation and informational webinars; deadlines and extensions

All pharmacies enrolled in Alaska Medicaid are required to participate in the survey; informational webinars are scheduled and surveys must be returned by April 9, 2024 (acceptance extended to April 16, 2024 for representation).

Informational meetings/webinars available (dates include March 14 and March 19, 2024).
Original due date April 9, 2024; DOH instructed Myers and Stauffer to accept surveys through April 16, 2024.

Documentation Required

If selected for desk review, submit financials, prescription reports, store diagram, and work papers within 10 days

Selected pharmacies must submit supplemental desk review documentation within ten days; required items include a store‑specific financial statement or single‑store federal tax return (with schedules), prescription reports, store diagram/blueprint for square footage, and any other work papers used to complete the survey.

Provide store‑specific financial statements or single‑store tax return with schedules.
Provide prescription dispensing reports and store diagrams/blueprints.
Submit any other work papers relied upon to complete the survey.
Documentation must be submitted within ten days of the request (can be emailed to disp_survey@mslc.com).

Denial Risk

Non‑response penalty: dispensing fee may be reduced to $3.45

Pharmacies that do not meet the initial submission deadline may have their professional dispensing fee reduced to $3.45 and may be subject to sanctions under Alaska regulations until a completed survey is submitted.

Fee reduction to $3.45 applies until a completed survey is submitted.
Additional sanctions may be imposed under 7 AAC 105.400–105.490.

Billing Rule

Inflate reported overhead and labor costs to 12/31/2023 using BLS indices

Apply inflation adjustment factors (based on the BLS Employment Cost Index with linear interpolation for non‑quarter months) to reported overhead and labor costs to normalize costs to December 31, 2023 (midpoint for fiscal period ending 6/30/2024).

Inflation factors adjust each pharmacy's reported costs from its fiscal year midpoint to 12/31/2023.
Quarterly indices from the BLS Employment Cost Index were applied and non‑quarter months interpolated linearly.

Note

Survey results include per‑pharmacy dispensing cost values and statistical summaries

Survey results present per‑pharmacy original and revised dispensing cost per prescription, with reported means, medians, weighted measures, and aggregate cost measurements used to inform reimbursement options.

Results include unweighted means, weighted means (by total and Medicaid volume), and medians.
Exhibit tables list original and revised per‑pharmacy dispensing cost values and aggregate statistics.

Documentation Required

Verify your listing on the participating pharmacies roster

A list of pharmacies participating in the Alaska Cost of Dispensing Survey is provided; pharmacies named in the participant list are considered participating and should submit individual surveys as applicable.

Participant roster includes chain and independent pharmacies, hospital and tribal providers as listed in the document.
Verify your store(s) on the attached participant list and notify Myers and Stauffer of inaccuracies.

Definitions and Terms Used

A pharmacy located in Alaska and connected to Anchorage by road.

Definition: On the RoadA pharmacy located in Alaska and connected to Anchorage by road.

Context: use in analysisUsed to classify pharmacies for on/off road comparisons and weighting

Source mappingDetermined from pharmacy ZIP code and claims-designated location

A pharmacy located in Alaska that is not connected to Anchorage by road.

Definition: Off the RoadA pharmacy located in Alaska that is not connected to Anchorage by road.

Use in surveyClassified for higher observed dispensing costs in off-road group

Footnote referenceSee footnote defining On/Off Road System in report

"On the Road" pharmacy

Term: "On the Road" pharmacyShorthand for a pharmacy located in Alaska connected to Anchorage by road (On the Road System).

ImplicationTypically lower weighted median dispensing cost compared with off-road counterparts

Classification methodDesignated via DOH claims file and ZIP-to-locality mapping

"Off the Road" pharmacy

Term: "Off the Road" pharmacyShorthand for a pharmacy located in Alaska not connected to Anchorage by road (Off Road System).

Cost characteristicObserved substantially higher weighted median dispensing cost ($22.17 for non-I/T/U)

Sample size noteOff-road non-I/T/U sample in Table 1.3: n=15

Weighted Median

Weighted Median (definition)The dispensing cost at which half of prescriptions (by weight) are at or below and half are at or above that cost; determined by ordering prescriptions by cost and finding the middle observation.

Use-caseMitigates influence of outliers compared with arithmetic mean

Applied measuresWeighted medians reported by Medicaid and total Rx volume in tables

Specialty Pharmacies

Specialty pharmacy (reporting criterion)Pharmacies reporting 50% or more of prescription sales from intravenous, home infusion, clotting factor and/or other specialty services are classified as specialty for this analysis (I/T/U grouped as non-specialty).

Observed effectSurvey did not reveal significantly higher dispensing cost for specialty-identified pharmacies in this sample

Examples of specialty servicesInfusion, TPN, clotting factors, specialized equipment and patient monitoring activities

Full-time Equivalent (FTE)

Full-time Equivalent (FTE) calculationTotal weekly hours worked for a job category ÷ 40; round to nearest tenth

Example calculation(38 + 22 + 16) ÷ 40 = 1.9 FTEs

FTE can be decimalReport decimal FTEs to nearest tenth per survey instructions

Direct Dispensing Activities

Direct Dispensing Activities (definition)Pharmacist time associated with transferring possession of the covered outpatient drug to a Medicaid beneficiary, including checking coverage, DUR/PDL review, measurement/mixing, filling, counseling, delivery, and special packaging.

Reporting guidanceReport percent of time spent on direct dispensing activities for each employee/category

Relation to FTEsPercent-of-time columns must total 100% per row and are used to allocate labor costs

Medication Therapy Management (MTM) and Vaccine Administration

MTM and Vaccine Administration (definition)Includes services such as medication therapy management and vaccine administration (registration, administration, monitoring); counseling at dispensation is reported as Direct Dispensing Activities.

Reporting instructionReport percent of time spent on MTM and vaccine administration per employee/category

ExamplesPatient education, monitoring after vaccine administration, counseling services

COD survey

COD survey (abbreviation)Cost of Dispensing (COD) survey conducted by Myers and Stauffer LC for Alaska DOH

PurposeTo collect pharmacy cost data to inform Alaska Medicaid dispensing fee evaluation under 42 CFR §447.518

Submission deadlineInitial due date April 9, 2024 (extensions noted)

Locum tenens

Locum tenens reportingReport pharmacist salaries and benefits for locum tenens on page 5 of the survey; associated room and board on page 9

PurposeEnsure temporary staffing costs are captured and appropriately allocated to dispensing cost

Examples of locum-related costsRoom and board, contracting fees reported separately on survey pages

Recruiting and training costs

Recruiting and training costs (reporting)Include recruiting, moving, housing and training costs on appropriate lines (pages 8 or 9) of the survey tool

Allocation noteIdentify these costs so they can be allocated to dispensing where appropriate

Relation to vacancy costsSeparate from vacancy-related overtime which should be included in salaries/benefits reporting

Pharmacist vacancies

Pharmacist vacancies (reporting guidance)Capture vacancy-related overtime within reported salaries and benefits; report additional locum and recruiting costs separately as described

Desk review supportSelected pharmacies must provide documentation to verify vacancy-related cost reporting

PurposeEnsure completeness of labor cost allocation in dispensing cost calculation

Myers and Stauffer LC

Myers and Stauffer LC (contractor)National CPA firm contracted to conduct the Alaska pharmacy COD survey and supplemental reviews on behalf of Alaska DOH

Contact infoToll-free 1-800-374-6858; disp_survey@mslc.com

RoleSurvey administration, validation, supplemental desk reviews, and data analysis

Supplemental desk review

Supplemental desk review (definition)Quality assurance process requiring selected pharmacies to submit supporting documentation to verify and reconcile submitted survey data within ten days

Required documentsStore-specific financial statements or single-store federal tax returns, prescription reports, store diagrams/blueprints, and other work papers

Consequence of selectionMyers and Stauffer will adjust reported costs where documentation indicates revisions are needed

Chain

Chain (definition)Organization with four or more pharmacies under common ownership or control on a national level

Use in analysisChains were analyzed separately in some exhibits (chain vs independent comparisons)

Regulatory footnoteDefinition provided in report footnotes

On/Off Road System

On/Off Road System (term)Classification system: 'On the Road System' = connected to Anchorage by road; 'Off Road System' = not connected by road

PurposeUsed to stratify cost results and consider geographic fee differentials

Determination methodDOH designation via claims data and ZIP-to-locality mapping

I/T/U

I/T/U (definition)Indian Health Service/Tribal/Urban Indian pharmacies; surveyed and reported as a separate category

I/T/U sample size24 pharmacies included in analysis

I/T/U cost characteristicsHigher mean and weighted mean dispensing costs compared with non-I/T/U (e.g., weighted mean $28.66)

Customized patient medication packaging

Customized patient medication packaging (inclusion)Pharmacies self-reporting dispensing 75% or more of prescriptions in customized patient medication packaging are identified for some analyses per 12 AAC 52.520

Use in analysisSuch pharmacies may be included/excluded for subgroup analyses due to different service patterns

Footnote referenceDefined in report footnotes and methodology

Geography and chain definition

Geography and chain definition summaryOn the Road = connected to Anchorage by road; Off Road = not connected by road; Chain = 4+ pharmacies nationally

ApplicationUsed to stratify sample and present cost statistics by affiliation and geography

SourceDefinitions and footnotes in report (see footnote section)

Customized patient medication packaging inclusion

Inclusion criterion for customized packaging analysesPharmacies self-reporting 75%+ of prescriptions in customized patient medication packaging included in some analyses

Regulatory citationReference to 12 AAC 52.520 in footnotes

ReasonPackaging prevalence may materially affect dispensing activities and costs

Participating pharmacy

Participating pharmacy (definition)A pharmacy named in the Alaska Department of Health Cost of Dispensing Survey participant list

Roster availabilityParticipant list included in the report (Exhibit of participating pharmacies)

RequirementEach named participating pharmacy must submit a survey form for its location