As states take important steps to lower prescription drug costs, at least six have implemented prescription drug affordability review initiatives, although approaches vary across states. The National Academy for State Health Policy (NASHP)’s new chart, Comparison of State Prescription Drug Affordability Review Initiatives, provides a road map of the diverse efforts taken by Maryland, Maine, New Hampshire, New York, Massachusetts, and Ohio.
Maryland’s PDAB Phased-in Approach
Maryland’s PDAB, enacted in 2019, was based on the NASHP model but initially limits the board’s ability to set upper payment limits to only public purchasers, pending approval by the state legislature. The landmark Maryland law also includes a phased-in approach that could eventually establish upper payment limits for all payers in the state, including the commercial market. The start-up cost for the Maryland PDAB is roughly $750,000 and covers five full-time employees. The funding mechanism for Maryland’s board was vetoed by Gov. Larry Hogan, however the General Assembly recently overrode the veto.
In determining whether a drug is unaffordable, the Maryland board can consider a variety of factors, including:
- The wholesale acquisition cost (manufacturers’ list price) or another relevant drug cost index;
- Average rebates provided to health plans, pharmacies, and pharmacy benefit managers;
- Net drug prices; and
- Average patient copay.
In its early meetings, the board began to outline a list of potential drug pricing data sources it will need to access in order to determine an appropriate upper payment limit.
State Approaches that Leverage Purchasing Power
Maine and New Hampshire have also enacted laws creating their own unique PDABs. While these boards are called PDABs, it is important to note that, unlike Maryland, they do not have the authority to set payment limits, but are instead focused on leveraging public purchasing power to lower drug costs.
To accomplish that mission, Maine and New Hampshire’s boards are charged with recommending strategies for public purchasers to lower the cost of prescription drugs in order to meet drug spending targets that will be established by the boards. Ohio enacted a law creating a Prescription Drug Transparency and Affordability Council, but the law does not aim to set upper payment limits. Instead, it established a group of stakeholders to provide recommendations to the governor and legislature on actions that could lower drug costs in Ohio.
In addition to the models described above, New York and Massachusetts are engaged in affordability review initiatives that focus on drugs purchased by their states’ Medicaid agencies. As NASHP’s new chart shows, New York and Massachusetts use affordability reviews and direct negotiations with drug manufacturers to attain supplemental rebates on high-cost drugs.
Using Canadian Prices to Set Upper Payment Limits
NASHP’s model legislation’s key strategy was to set enforceable upper payment limits for prescription drugs in order to rein in drug prices. However, particularly with COVID-19’s impact on state budgets, not every state has the resources and capacity to establish a new entity to oversee the robust review of drug costs necessary to establish upper payment limits through a PDAB. During the 2020 legislative session, Washington Gov. Jay Inslee vetoed a number of bills based on cost concerns, including a measure that would have established a PDAB.
In the current 2021 legislative session, four states have introduced bills to establish a PDAB but others have refrained due to budget constraints. To support states facing those budget pressures, NASHP has also released a less costly, alternative approach to setting an upper payment limit – NASHP’s international reference rate model.
Using Canadian drug prices, the model allows a state insurance department to set an upper payment limit for up to 250 high-cost drugs (determined by drug price times utilization). A state could revise the model and use an affordability board structure as well. Canadian prices, which are established with reference to prices in various comparable countries, offer a less costly and labor-intensive process of determining upper payment limits.
Lawmakers in five states (HI, ME, OK, ND, and RI) have introduced or pre-filed bills based on the NASHP’s international reference rate model legislation and more bills are expected to be filed. To learn more about NASHP’s legislative models to curb drug costs and estimated savings from each of them, please contact Jennifer Reck.
Nursing home residents account for at least one-third of COVID-19 deaths, and this disparity reveals numerous problems with infection control in institutional settings. As a result, many states are rethinking and restructuring their long-term services and supports (LTSS) programs.
A recent National Academy for State Health Policy (NASHP) annual conference session explored what states have learned during the current health crisis that could improve LTSS during and beyond the pandemic. State officials from Washington State, Wisconsin, and Ohio highlighted their states’ responses to the current crisis, emerging innovations, and prospects for restructuring LTSS in a post-COVID-19 era.
Maximizing the Flexibility of Home- and Community-Based Waiver Services
Washington State, home to the first nursing home to be ravaged by COVID-19 in the United States, immediately worked with federal partners to maximize the flexibility of home- and community-based waiver services following its first reported case. The state was among the first to receive approval from the Centers for Medicare & Medicaid Services (CMS) for its 1135 and 1115 Medicaid waivers, which provided enrollees with increased access to services during the COVID-19 pandemic and additional supports to LTSS workers. State officials noted that the presumptive eligibility measures incorporated into these new waivers ensured that individuals were able to access the LTSS they need without having to wait for their applications to be fully processed. This flexibility has helped minimize administrative burdens on eligibility workers as states face increased demands on their Medicaid programs.
Like Washington State, Wisconsin utilized waivers to implement much-needed flexibility within its home- and community-based services (HCBS) provided through the state’s 1915(c) Medicaid waiver. Importantly, the state expanded the ability of its HCBS agencies to provide waiver services remotely, including care coordination and day services. The state also modified service delivery for Medicaid acute primary services, allowing these to be delivered through telehealth and other technologies to comply with social distancing.
Leveraging State Resources to Prevent and Contain Outbreaks for High-Risk Individuals
To contain and prevent outbreaks, Ohio relied on the following guiding principles to support its nursing facilities throughout the pandemic:
- Leverage regional and local leadership to coordinate a unified response; and
- Provide resources to support nursing facilities, including additional health services and technical assistance. These efforts were supported by $314 million from the US Department of Health and Human Services (HHS), some of which was provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, that was specifically dedicated to Ohio skilled nursing facilities (SNFs). Each SNF in Ohio with six or more certified beds was eligible to receive a fixed distribution of $50,000 plus an additional $2,500 per bed.
To coordinate a unified state COVID-19 response, Gov. Mike DeWine and leaders from a major hospital chain created three health care zones divided among the state’s large metro areas to manage hospital capacity and maintain patient level of care during an anticipated surge in hospitalization services. State officials in the three health care zones paired nursing facilities with local hospitals to manage distribution of personal protective equipment (PPE) and to ensure that staff were well-equipped to treat patients.
Additionally, the state developed the following resources to support nursing facilities, staff, and patients throughout the pandemic:
- A toolkit developed by the Ohio Department of Aging, Department of Health, Department of Developmental Disabilities, and Department of Medicaid to assist nursing facilities with assessing residents and determining their care needs during a COVID-related surge in service utilization;
- Increased testing services for nursing facility staff as mandated by a Public Health Order signed by the director of the Ohio Department of Health and conducted by the Ohio National Guard over a period of two months; and
- Congregate Care Unified Response Team (CCURT) Bridge Team, composed of staff from the Ohio Department of Health and Ohio Department of Medicaid, to assist nursing home staff with decision making in emergency situations and coordinating facility communication with relevant state agencies, the Emergency Operations Center, health care zones, and hospitals in the area.
Many of the steps taken by Ohio state officials track with the principal recommendations issued by the CMS-appointed Coronavirus Commission Report for Safety and Quality in Nursing Homes, including establishing a statewide strategy for testing in nursing homes, coordinating with state and local leadership, leveraging resources to support the nursing home workforce, and assembling a long-term care emergency response team to evaluate and guide emergency care coordination. With these strategies and systems in place, Ohio and other states now have the infrastructure to better manage infection control in institutional settings for future public health emergencies.
While many of the policy changes highlighted here are temporary and in effect only during the pandemic, it is important to understand the impact of these changes on cost and quality of life to determine which, if any, should be retained after the pandemic. State officials from Washington State, Ohio, and Wisconsin reported they found the following flexibilities especially helpful:
- Presumptive eligibility for LTSS, so the state can initiate home- and community-based services as quickly as possible;
- Waiving plan signatures and self-attestation in favor of post-enrollment verification to ensure that enrollees receive timely supports; and
- Flexibilities for respite care for family caregivers, particularly those supporting individuals with intellectual and developmental disabilities, to reduce stress and burnout.
State officials noted it would be helpful to receive support from CMS in retaining these flexibilities. State officials also suggested that broader legislative changes to Medicaid, such as streamlining Medicaid authorities that support HCBS and making HCBS mandatory state plan services on par with nursing home care, would help reduce administrative complexity and facilitate rebalancing efforts.
People with substance use disorders (SUD) who are experiencing housing instability or homelessness are particularly at risk during the COVID-19 pandemic, leaving states challenged more than ever to identify effective housing strategies that can simultaneously address the complex treatment needs of people with SUD while also curbing the spread of COVID-19 in congregate settings.
To improve the quality of services for children and youth with special health care needs (CYSHCN) and reduce health care costs, states are implementing strategies to improve access to home health services. Of particular importance as states confront COVID-19-related budget challenges, home health services can help to avoid costly emergency department use, hospitalizations, and institutional care.
In the face of rapidly rising prices, state Medicaid programs are asserting their prescription drug purchasing power through more active oversight of the administration of prescription drug benefits. As major drug purchasers, state Medicaid programs have leverage to lower costs without action from state legislatures. Ohio, Washington, and West Virginia have recently deployed a range of strategies to curb drug costs:
- Ohio requires Medicaid managed care plans to adopt transparent, pass-through payment models with their pharmacy benefit mangers (PBMs).
- To maximize rebate potential and reduce administrative burden, Washington State is implementing a single preferred drug list (PDL) across Medicaid fee-for-service and managed care plans.
- West Virginia carved out the prescription drug benefit from its managed care contracts and now acts as its own PBM to increase oversight of drug purchasing and reduce costs.
Below is a detailed explanation of how these three states have implemented innovative purchasing strategies for their Medicaid pharmacy purchases.
Ohio Requires a Transparent, Pass-Through PBM Payment Model
A 2018 report found that PBMs retained profits of $224 million by creating a “spread” between what Medicaid paid PBMs for pharmacy claims versus what PBMs paid pharmacies. In response, Ohio mandated that managed care plans switch to contracts with transparent, pass-through payment models with the PBMs. With a transparent, pass-through model, states can ensure PBMs do not profit off this spread-pricing practice and pass through drug discounts and rebates to managed care plans. PBMs are instead reimbursed more directly through fees. Wisconsin’s state employee health plan requires a similar, fully transparent, pass-through payment model. Through this change in contract terms, Wisconsin’s per member, per month drug costs were more than 10 percent below industry averages from 2016 to 2018.
Ohio state officials report making significant changes to managed care contracts to increase transparency, reporting, and accountability pertaining to their PBM contracts and drug payments. Through enhanced reporting from managed care plans, officials have been able to confirm the successful implementation of the pass-through model. Ohio’s 2020 budget goes a step farther, requiring all managed care plans to contract with a single PBM, which will be selected by Ohio’s Medicaid department, giving the state more authority over drug purchasing.
Washington State: Implementing a Single, Standard Medicaid PDL Across MCOs
In January 2018, the Washington Healthcare Authority implemented a single PDL – a list that indicates which drugs are “preferred” by the state and do not require prior authorization. Washington’s Medicaid program transitioned from six different PDLs across managed care organizations (MCO) to one. A single PDL provides a number of advantages, including:
- Administrative ease for providers, patients, and pharmacies;
- Rebate maximization by selecting drugs with the lowest cost or maximum rebate potential;
- Rebate transparency for more accurate cost management; and
- Fewer disruptions for patients who may switch between managed care plans.
To transition to a single PDL, Washington submitted two State Plan Amendments – one for the single PDL and one to include managed care plans in its supplemental rebate contracts through a multi-state purchasing pool for drugs on the PDL. Washington also added and amended contracts with a number of vendors to ensure the Medicaid agency and managed care plans had access to the same drug data sources to allow seamless collaboration – an important detail for ensuring care coordination. Officials met with managed care plans weekly to plan and roll out the three phases of implementation, ensuring that drugs added to the PDL were clinically appropriate and cost-effective for the state and the plans. Implementation began with 27 drug classes and is expected to be complete by April 2020 with almost 400 different drug classes included in the PDL.
West Virginia: Carving Prescription Drugs Out of Managed Care
In 2017, West Virginia Medicaid began acting as its own pharmacy benefit administrator under a fee-for-service model, after carving out prescription drug benefits from its managed care contracts. To accomplish the prescription drug carve-out, West Virginia:
- Added an additional pharmacist to its staff;
- Stress-tested its existing claims processing system;
- Increased its capacity for prior authorizations; and
- Educated the public and its help desk staff about the program change.
West Virginia’s Medicaid program now covers over 550,000 enrollees through a fee-for-service model. State officials report they are able to effectively manage the pharmacy benefit and maintain care coordination across MCOs, while obtaining savings for the state. The prescription drug carve-out led to a savings of $54.5 million in 2018. Additionally, changes to the state’s reimbursement methodology during the carve-out process led to an infusion of $122 million in dispensing fees to the state’s pharmacy community.
While West Virginia is acting as its own PBM, California is carving out the prescription drug benefit from its managed care contracts and contracting with a single PBM to leverage the state’s immense purchasing power. California will use strict contracting terms to ensure greater transparency and cost savings with the contracted PBM. Michigan is currently considering a drug carve-out and legislatures in Louisiana and Nevada prompted their Medicaid programs to explore a potential carve-out of prescription drugs from managed care.
As states strengthen their oversight of drug purchasing, the National Academy for State Health Policy (NASHP) has created and will soon release a model PBM contract for states. Informed by Ohio and Minnesota’s contracts, NASHP’s model contract is designed to help states ban spread pricing and better understand rebate arrangements with their PBMs. To learn more about other administrative actions to curb rising drug costs, read the Administrative Action section of NASHP’s Prescription Drug Pricing website.
Friday, Nov. 1, 2019
3:30-4:30 p.m. (ET)
Faced with rising prescription drug costs, state Medicaid programs are implementing innovative policies to manage their pharmacy benefit and find savings. This webinar, for state officials only, is an opportunity to hear officials from three leading states:
- West Virginia carved pharmacy benefits out of its Medicaid managed care program in 2017 and reports that its shift to a fee-for-service model saved the state over $54 million in state fiscal year 2018.
- In response to a report demonstrating the cost to the state when pharmacy benefit managers (PBMs) profit from “spread pricing,” Ohio began requiring managed care plans’ contracts with PBMs to include a transparent, pass-through payment model and to prohibit spread pricing as of January 2019. Ohio’s recently passed 2020 budget bill goes a step farther, requiring all managed care plans to contract with a single PBM, which is selected by the Ohio’s Medicaid department.
- To lower the cost of drugs and maximize rebate potential, Washington’s Medicaid program implemented a single formulary for all managed care and fee-for-service pharmacy benefits on Jan. 1, 2018.
This webinar is for state officials only and will not be recorded.
Moderator: Trish Riley, Executive Director, National Academy for State Health Policy
- Brian Thompson, MS, PharmD, Director of Pharmacy Services, Bureau for Medical Services, West Virginia Department of Health and Human Resources
- Vicki Cunningham, PharmD, former Director of Pharmacy Services, Bureau for Medical Services, West Virginia Department of Health and Human Resources
- Maureen Corcoran, MBA, MSN, Director, Ohio Department of Medicaid
- Donna Sullivan, MS, PharmD, Chief Pharmacy Officer, Washington Health Care Authority
NASHP is pleased to announce the 10 states selected to attend the State Policymakers Palliative Care Summit, supported by a grant from The John A. Hartford Foundation. Policymakers, including legislators as well as Medicaid and public health officials from Arizona, Colorado, Hawaii, Kentucky, Massachusetts, Minnesota, Ohio, Oklahoma, Pennsylvania, and Texas, will participate in the day-long summit where they will learn from national and state experts about strategies to improve access to and quality of palliative care. For more information about palliative care, explore NASHP’s Palliative Care Resource Hub and sign up for its palliative care listserv.