Removing wasteful drugs from formularies and replacing them with drugs that offer the same benefits at a lower cost, helps state employee health plans and other public purchasers reduce spending without sacrificing value – a critical strategy for savings as states face tremendous budget pressures.
The Centers for Medicare & Medicaid Services (CMS) had a mixed response to two states’ innovative efforts to control Medicaid drug costs in June. The agency denied Massachusetts’ 1115 waiver request to create a closed Medicaid drug formulary, but it approved Oklahoma’s State Plan Amendment that authorizes supplemental rebates for value-based purchasing arrangements with pharmaceutical manufacturers.
Here’s a snapshot of the two applications :
The Massachusetts 1115 waiver request contained a provision that allowed the state to exclude certain low-value drugs – which render fewer benefits relative to their costs — from its Medicaid drug formulary. Currently, states must cover all prescription drugs as a condition of their participation in the federal Medicaid Drug Rebate Program (MDRP). In its denial of Massachusetts’ waiver provision , CMS reiterated that a state would have to fully forgo participation in the MDRP in order to create a closed formulary, and that federal costs from the closed formulary could not exceed costs that would have been incurred otherwise. CMS’s response to Massachusetts mirrors the Trump Administration’s proposal for a five-state demonstration project to test the impact of allowing states to negotiate their own drug formularies outside of the rebate program.
|Learn More at NASHP’s Rx Summit, Aug. 15-17, 2018, Jacksonville, FL
To learn more about these two states’ efforts to control drug costs and other new and emerging state strategies, attend NASHP’s 31st Annual State Health Policy Conference’s Summit on State Strategy and Tactics to Lower Rx Prices on Aug. 17, 2018, in Jacksonville, FL.
The summit, open only to state officials, includes a panel discussion on “New Tools for Medicaid to Cut Drug Costs” with speakers from Massachusetts, Oklahoma, New York, and other states. Learn more about the conference here and register by July 20 to get the early bird discount.
Oklahoma’s State Plan Amendment, which enables value-based purchasing, was approved by CMS, making it the first state plan to incorporate supplemental rebates for value-based purchasing agreements with drug manufacturers. The state will negotiate additional rebates from drug manufacturers for high-cost drugs that do not achieve agreed-upon outcomes. Through support from the Laura and John Arnold Foundation, NASHP awarded Oklahoma a sub-grant in October 2017 to advance value-based purchasing as a solution to rising drug costs. NASHP’s sub-grant to Oklahoma supports the data analytics required to explore the feasibility and design of contracts for value-based purchasing of specific drugs. The results of this value-based purchasing initiative including findings on how to expedite data analytics will be shared with other states interested in following in Oklahoma’s footsteps.