184. Omnicare's Medicaid-reimbursed servIces are provided under contractual
agreement through each state's Medicaid provider licensure program. In Illinois, for example,
Omnicare contractually agrees to provide pharmaceuticals to Illinois Medicaid patients in the
long-term care facilities it serves. In return, the Illinois Department of Healthcare and Family
Services ("IDHFS," formerly the Illinois Department of Public Aid), the Illinois state agency that
administers Medicaid, reimburses Omnicare at a statutorily-defined ratel , plus a small dispensing
fee, which is meant to provide Omnicare with a profit for providing services to Illinois Medicaid
In order to be eligible for Medicaid reimbursement, Illinois pharmacies (including
Omnicare's dispensing pharmacies) must complete an IDHFS application process and obtain a
provider number. Providers completing this application process must attest to their professional
licensure, their Drug Enforcement Administration identification numbers, and must agree to the
following provisions stated in the application, entitled "Agreement for Participation in the
Illinois Medical Assistance Program":
The provider agrees, on a continuing basis, to comply with applicable licensing standards as contained in the State laws or regulations.
3 Medicaid reimbursement rates are the lowest of the following five possible prices:
The average wholesale price minus 12 percent
The federal upper limit price
The state upper limit price in the Illinois Formulary for the Drug Selection Program
The average wholesale price where price is based on actual market wholesale price or
The wholesale acquisition cost plus 12 percent.
See, 891l. Adm. Code 140.445 (I). The state calculates the average wholesale price and wholesale acquisition costs based on its estimates of the price generally and currently paid by providers or as sold by a particular manufacturer. See 42 C.F.R. 442.301 (2001). See also, Rite Aid of Pennsylvania v. Houstoun, 171 F.3d 842,846 (3rd Cir. 1999) (Explanation of state Medicaid prescription pricing systems under federal regulations).