Health Reform WK-EDGE States are taking varied approaches to reduce prescription drug spending
Wednesday, May 13, 2020

States are taking varied approaches to reduce prescription drug spending

By Rebecca Mayo, J.D.

States are expanding the scope of their clinical and administrative oversight of the Medicaid pharmacy benefit programs.

In an effort to better understand how the Medicaid pharmacy benefit is administered across states, the Kaiser Family Foundation (KFF) and Health Management Associates conducted a survey of the states and the District of Columbia. Medicaid drug spending growth has slowed, after seeing a sharp spike in 2014 due to specialty drug costs and coverage expansion under the Patient Protection and Affordable Care Act (ACA). However, Medicaid prescription drug spending is expected to grow in future years and remains a top concern of state policymakers. According to the KFF survey, as Managed Care Organizations (MCOs) and pharmacy benefit managers (PBMs) play an increased role in Medicaid pharmacy benefits, states are expanding the scope of their oversight and imposing greater controls over MCO policies and pricing.

Administration. All but one state reported outsourcing some or all functions to one or more vendors, with the most commonly outsourced functions being claims payment, utilization management, and drug utilization review. To adapt to the growth in managed care and the growing role of PBMs, states are exploring pharmacy policy reforms such as drug carve-outs, PBM pass-through pricing, and transparency reporting requirements. Without oversight, some PBMs have been able to keep the "spread," or the difference between the payment the PBM receives from the MCO and the reimbursement amount it pays to the pharmacy. However, states are taking action to prevent or monitor spread pricing within MCO-PBM contracts.

Managing cost. State Medicaid programs are required to cover all drugs from manufacturers that have entered into a federal rebate agreement, which means that states cannot limit the scope of covered drugs to control drug costs. To limit pharmacy expenditures, states use different payment strategies and utilization controls. Most states reported having a preferred drug list (PDL) in place for fee-for-service prescriptions, which allows states to drive the use of lower cost drugs and offer incentives for providers to prescribe preferred drugs. Additionally, most states reported that prior authorizations were always or sometimes imposed on new drugs.

While federal regulations guide payment levels for ingredient costs, states may set policies on dispensing fees paid to pharmacies and beneficiary cost-sharing within federal guidelines. Most states reported negotiating for supplemental rebates in addition to federal statutory rebates. Many states entered into a multi-state purchasing pool to enhance negotiating leverage and collections. A few states have employed alternative payment methods to increase supplemental rebates through value-based arrangements negotiated with individual pharmaceutical manufacturers. The 340B program offers discounted drugs to certain safety net providers that serve vulnerable or underserved populations, including Medicaid beneficiaries. States have varied strategies to avoid receiving duplicate discounts on 340B drugs dispensed by safety net providers.

Ongoing concerns. States reported concerns related to enacted legislation as well as monitoring proposed federal and statutory efforts related to drug pricing, drug reimportation, gene and cell therapies, and PBM contracting reforms. States continue to explore MCO pharmacy policy reforms and remain concerned about prescription drug spending growth and continue to explore policies to ensure fiscal responsibility.

IndustryNews: NewsStory 340BNews DrugNews GeneralNews MedicaidNews NewsFeed

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