Feds Reject Higher Dispensing Fee; Pharmacy Provider Tax Void

State Will Not Refund Tax; Expects to Take 8 Months to Recoup Fee

Alabama pharmacists should have already received notices from the Alabama Medicaid Agency and the Alabama Department of Revenue informing them that a 15-cent increase in the pharmacy provider tax paid by pharmacies and a related increase in the dispensing fee paid by Medicaid to pharmacies have both been voided.

In a June 17, 2016, letter, the Centers for Medicare and Medicaid Services rejected the $13.83 dispensing fee that pharmacies have received since Nov. 15, 2015.

Effective Wednesday, July 13, 2016, the dispensing fee for Medicaid outpatient pharmacy claims reverts back to $10.64, according to the Medicaid notice.

As of June 17, 2016, the pharmacy provider tax reverts to 10 cents for every prescription filled. Pharmacies will no longer have to pay the 15-cent additional tax you have paid since Oct. 1, 2015, according to the Revenue Department notice. This is a tax paid by the pharmacy, not the consumer.

Unless additional legislation passes, the state does not plan to refund the “close to $9 million” officials said they have collected as a result of the increased pharmacy provider tax. In a Tuesday, July 12, 2016, provider group meeting attended by Alabama Retail Association representatives, Medicaid Commissioner Stephanie Azar said the governor asked her to convey to pharmacists that IF FULL FUNDING for Medicaid is found in a special or regular session, he would work to change the law to allow for a refund. Pharmacies should not count on a refund. Your association will let you know if the political realities of this situation change.


  • On pharmacies’ June 2016 state tax return, which is due July 20, pharmacists should pay a provider tax at a rate of 10 cents for every prescription sold between June 17 and June 30. See Revenue Department notice for further instructions.
  • If you have questions about what taxes your pharmacy owes or the Revenue Department notice, call Deputy Revenue Commissioner Joe Garrett at 334.242.1175.
  • Recoupment of the increased dispensing fee will begin with the first checkwrite of August. Medicaid will “reconcile the difference in dispensing fees,” in chronological order, beginning with the fees distributed on Nov. 15, 2015. Azar and her staff said it will take as long to recoup the fees as it took to issue them, about eight months. The money will be recouped through “incremental debits to pharmacy accounts,” rather than a lump sum, Azar said.