JUNE 27, 2018
WASHINGTON
— The Trump administration wants states to experiment with drug prices — but
not too much.
In a pair
of decisions Wednesday, top health officials offered the first clear signals of
just how far they will let state Medicaid agencies go when it comes to
negotiating discounts for prescription drugs. The administration declined to
approve a bolder proposal from Massachusetts to
use a formulary to exclude some drugs from Medicaid coverage, a common
negotiating tactic for commercial plans. At the same time, it approved a
separate idea from Oklahoma to let the
state’s Medicaid program negotiate extra rebates if a given drug isn’t as
effective as expected.
The
Massachusetts decision is more consequential, in part because the proposal was
inherently more controversial. It is also a setback for health officials in
Massachusetts, who had painted the proposal as a bold plan to help lower the
cost of prescription drugs, in keeping with the Trump administration’s other
regulatory efforts in that space. And it’s a win for pharmaceutical companies
and patient groups that had opposed the idea of Medicaid formularies, saying
they would deny Medicaid beneficiaries in the state access to lifesaving
treatments.
The
decision also offers a clear example of the limits of President Trump and his
administration’s efforts to lower prescription drug prices. Health officials
proposed in their February budget letting five states experiment with the way
their Medicaid programs pay for drugs, including with formularies. The same
five-state experiment was a key pillar of the administration’s blueprint of
ideas to lower prescription drug prices, though top health officials have since
implied that broader experimentation with formularies could require
authorization from Congress.
In its
letter to Massachusetts, CMS did not formally reject the formulary proposal.
Rather, it said it was an idea “on which CMS continues to work with the state,”
and that the agency would “continue to provide technical assistance on options
to test innovative drug coverage mechanisms.”
Massachusetts’ proposal was relatively
simple: It wanted to exclude some drugs from coverage under its Medicaid
program — a common negotiating tactic for private insurers looking to avoid
paying for costly therapies. The state argued it should be able to use its
purchasing power to help lower its increasing spending on prescription drugs.
In
addition to concerns about access, pharmaceutical companies had argued the
proposal would upend the bargain that underpins Medicaid drug coverage across
the country: States guarantee the programs will cover just about any drug, in
exchange for steep discounts.
“Such a
one-sided waiver would tear up the careful legislative bargain Congress created
in the Medicaid rebate statute,” two representatives for the drug maker
lobbying group PhRMA wrote when Massachusetts first proposed the idea.
In its
rejection, the federal agency that oversees Medicaid, the Centers for Medicare
and Medicaid Services, did outline a path forward for state experimentation
with formularies — but it’s a complicated one. CMS said that to proceed, a
state would have to give up the discounts it gets under the Medicaid Drug
Rebate Program. The state would instead “negotiate directly with
manufacturers.” Should a state proceed with that route, it would have to ensure
the federal government wouldn’t spend more than it would have without the
experiment.
A
spokesperson for the state’s health care agency said it was open to exploring
other options — but emphasized, too, that participating in the drug rebate
program saved both the state and federal government millions each year. The
state says the rebate program is effective for some 99 percent of prescription
drugs, but hasn’t helped rein in costs for some newer, very expensive products,
the spokesperson said.
“While it
is disappointing that our request to more effectively control rising pharmacy
costs was not approved at this time, we remain committed to finding more
innovative state-based solutions to reduce the growth in drug spending while
maintaining access to necessary medications,” the spokesperson said in a
statement.
Oklahoma’s
proposal was simpler and less contested. It is based on an increasingly popular
point in the debate about how best to lower prescription drug costs:
value-based purchasing arrangements. The idea is that an insurer — in this
case, the state Medicaid agency — brokers a deal with the drug maker to get
some money back if the drug doesn’t work as well as it’s expected to.
Manufacturers
behind some particularly pricey therapies — like Novartis, which charges some
$475,000 for Kymriah, a CAR-T treatment for some patients with leukemia — have
already backed a similar idea. Novartis and Spark Therapeutics, which makes an
$850,000 drug for a rare form of blindness, have suggested they are working
with the federal government to find a similar way to offer outcomes-based
rebates in Medicare
Trump
health officials, led by Health and Human Services Secretary Alex Azar, have
included the value-based purchasing ideas as another key initiative in their
efforts to lower drug prices.
“Oklahoma’s
plan for value-based drug contracts is an important example of how states can
innovate to bring down drug costs,” he said in a statement Wednesday. “The
Trump Administration is committed to giving states the flexibility they need to
make healthcare more affordable, and strongly supports innovations like
value-based purchasing for prescription drugs.”
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