Governing
May 7, 2018
May 07--While
Congress remains gridlocked on health-care reforms -- particularly regarding
drug prices -- states are increasingly taking matters into their own hands.
In September,
Massachusetts submitted a waiver to the Centers for Medicare and Medicaid Services
(CMS) that asks permission to exclude certain drugs from its Medicaid program,
MassHealth.
It's a bold step,
says Tom Dehner, Massachusetts' former Medicaid director. The move, he says, is
an attemp to "take the next step in managing costs."
Indeed, Medicaid
costs have ballooned in recent years, with MassHealth now accounting for 40
percent of the state's budget. Massachusetts is hardly an outlier, as Medicaid
programs on average make up around 25 percent to 30 percent of states' budgets.
Prescription drugs are often cited as a key factor in the rising costs,
according to data from the Kaiser Family Foundation.
By declining to
cover more expensive drugs in favor of cheaper alternatives, Massachusetts'
Medicaid program will have greater leverage when negotiating drug prices, says
Matt Salo, director of the National Association of Medicaid Directors.
"The minute you cross that threshold and say, 'We're not going to cover
that drug,'" he says, "that suddenly creates a different dynamic between
the payers and the manufacturers. You exclude one drug, that enables you to get
better pricing. It's 100 percent a great option."
As it stands, state
Medicaid programs receive hefty rebates from drug manufacturers. In return,
Medicaid programs are required to cover pretty much every drug approved by the
Food and Drug Administration. To put that in perspective, most private
insurance plans will decline to cover drugs when there is a cheaper or generic
alternative.
Massachusetts is
not alone in looking for more control over drug pricing. Arizona Medicaid
Director Thomas Betlach sent a letter to CMS Administrator Seema Verma in
November asking, among other things, for greater decision-making power in what
drugs Medicaid covers. "States should be permitted the flexibility to
exclude drugs until market prices are consistent with reasonable fiscal
administration and sufficient data exists regarding the cost effectiveness of
the drug," he wrote.
Similarly, Maryland
passed a law last year that allowed the state's attorney general to sue
drugmakers who hike prices without proper explanation. A judge struck down the
law last month.
The federal
government has sent mixed messages on whether or not it'll approve
Massachusetts' waiver. Verma has promised to give states more flexibility than
was granted under the Obama administration. But some observers think it's
unlikely she'll approve this waiver in its current form, arguing that the Trump
administration is friendlier to pharmaceutical interests. Alex Azar, the
current Health and Human Services secretary, is a former pharma executive.
Most experts,
though, didn't want to make any predictions on the timing or outcome of the
waiver, merely speculating that some kind of compromise is likely. One thing
seems certain: If Massachusetts is allowed more leverage over drug prices, more
states will certainly follow with similar waivers.
Lawsuits are also
expected to follow, from either advocacy groups concerned about limiting drugs
or pharmaceutical interests.
Ross Margulies, a
health-care lawyer with the law firm Foley Hoag, says the legal battle over
work requirements will be a good limitus test for this kind of waiver. When CMS
allowed Kentucky to enforce work requirements on its Medicaid beneficiaries, a
lawsuit from patient advocacy groups was almost immediately filed and is still
pending. If courts strike down the lawsuit and allow Kentucky to enforce work
requirements, it could indicate that states will also be allowed to take more
control over the drug pricing formulary.
However, while Margulies
says that "there's a technical legal argument to waive certain sections of
the rebate program," the bigger question is how drug companies will react
to that. "If a state no longer guarantees coverage for products," he
asks, "will a manufacturer hold up their end of the bargain for rebates?
That's trickier."
The Pharmaceutical
Research and Manufacturers of America has said that Massachusetts' waiver is
"unnecessary on top of the rebates Medicaid already receives,"
according to Kaiser Health News.
Meanwhile,
regarding advocates' concerns about limiting drugs, Salo maintains that
Medicaid recipients in Massachusetts won't suddenly be denied life-savings
drugs. Rather, drugs would be excluded after "a very carefully arrived at
decision, taking into consideration expert advice," he says. "They
also wouldn't exclude anything if it hasn't already been excluded in other
plans."
Mattie Quinn -- Staff Writer -- mquinn@governing.com --
@mattiekquinn
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