CMS Denied MassHealth Drug Proposal

From RADAR on Medicare Advantage

In a highly anticipated decision that suggests the limitations of the Trump administration's willingness to let states control their own destiny, CMS on June 27 said it would not allow Massachusetts to establish a closed drug formulary and negotiate directly with manufacturers for rebates. But on the very same day, CMS approved a state plan amendment (SPA) proposed by Oklahoma to advance specific Medicaid value-based purchasing arrangements with drugmakers — a move that puzzled some industry experts.

Jeff Myers, president and CEO of Medicaid Health Plans of America (MHPA), says CMS's decision wasn't surprising, but it was "interesting" that CMS simultaneously approved the Oklahoma SPA. And because Oklahoma is one of the few fee-for-service Medicaid states and supplemental rebates don't count against drug companies' "best price" calculations, he doesn't see that test in value-based purchasing as having a widespread impact.

Jerry Vitti, president and CEO of Healthcare Financial, Inc., calls the Massachusetts rejection "a win for pharma and a loss for low-income people," and says he finds it puzzling that the Oklahoma waiver was approved on the same day.

If the federal government wants states to employ private sector practices, MHPA has long maintained that formulary design should be left to the managed care companies that are taking full risk for about 75% of Medicaid enrollees, as opposed to about 8% when the Medicaid Drug Rebate Program was established in 1990.

"I think [the Massachusetts rejection] signals that CMS has very limited options when it comes to the statute of outpatient drug pricing," Myers says. "Sixty-eight percent of the managed Medicaid market is in the top 20 companies…and those companies have enormous ability to negotiate drug pricing in a way that will save the taxpayers money. So my takeaway is CMS is coming to the understanding that short of a statutory change, it's going to be very hard if not impossible to significantly change the way Medicaid drugs get purchased."

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