Without early identification and treatment of development delays, children may face long-lasting and costly consequences. With more states reporting their developmental screening Child Core Set measures and new federal initiatives promoting value-based payment for children’s health, Vermont’s innovative affordable care organization’s approach can provide valuable insights. This fact sheet describes Vermont’s strategy to prioritize developmental screenings of children covered by Medicaid during well-child visits.
- View or download: Vermont Uses an Accountable Care Organization Model to Prioritize Developmental Screenings during Well-Child Visits, May 2019
- To learn about other state initiatives, visit NASHP’s Healthy Child Development State Resource Center.
- To learn more about states’ Medicaid Incentives and Measures for Developmental Screening, view NASHP’s map.
FOR IMMEDIATE RELEASE
Thursday, January 3, 2019
The Vermont Agency for Human Services has presented its report on wholesale importation of prescription drugs from Canada as required by the state’s legislature pursuant to a law enacted last year. The National Academy for State Health Policy (NASHP), with a team of consultants including FDAImports.com, LLC and funding from the Laura and John Arnold Foundation, provided staff support to the effort, which concluded that significant savings would result from importation. Based on just 17 high-spend drugs identified for two of the state’s three major carriers, compared to Canadian prices, the savings would be between $1 to $5 million annually.
Trish Riley, Executive Director of NASHP, notes, “Importantly, these savings are a very conservative estimate. Our team added an additional mark-up, including a profit margin for the supply chain, which we think is very high but we wanted to show the minimum savings and be as conservative as possible in assessing those savings. The majority of costs to run the program are within the existing system of wholesale distribution for drugs. Even with additional mark-up to cover the supply chain costs, the savings are still significant.”
Riley said, “We have been pleased to work with Vermont officials on this important project. The work to date has provided a deeper understanding about the benefits and mechanics of importation. The next step is crafting an efficient administrative structure that has the flexibility to build and maintain the program and the resources to do so. This is a new, big idea and finding the best way to manage the program will require a collaboration between the legislature and the Agency. We look forward to that work and know there are a number of other states eager to work with Vermont as they consider similar legislation.”
During the 2018 legislative session, 28 states passed 45 laws to curb the rising cost of prescription drugs. In addition to legislative solutions, states are taking administrative action to better manage state spending on Medicaid pharmacy benefits. Ohio, West Virginia, and Vermont offer examples of states taking innovative administrative approaches to rein in drug costs.
Ohio Medicaid Replaces Spread Pricing with More Transparency
In August, the Ohio Department of Medicaid announced it would require its five managed care plans to end contracts with pharmacy benefit managers (PBMs) that used “spread pricing.” Spread pricing is a payment model that allows PBMs to profit by charging insurance plan sponsors more for a prescription than the PBM pays the dispensing pharmacy. The lack of transparency in the spread-pricing model makes it difficult for states to identify how much spread pricing contributes to their overall drug costs.
Ohio investigated the impact of spread pricing and found it generated an 8.8 percent PBM markup on its Medicaid managed care pharmacy claims, a margin that enabled PBMs to pocket an average of $5.70 per prescription dispensed. In response, starting Jan. 1, 2019, Ohio will require managed care plans to use a transparent, pass-through payment model that requires PBMs to charge Medicaid exactly what they pay the dispensing pharmacy. To compensate PBMs under this pass-through pricing model, Medicaid managed care plans will pay PBMs an administrative fee estimated at 95 cents to $1.90 per prescription. To meet the deadline, managed care plans are working with PBMs to restructure contracts to comply with the pass-through requirement.
In contrast to Ohio’s administrative approach, Louisiana’s 2018 spread pricing law, Act 483, bans PBMs that contract with the state from retaining any revenue in excess of the amount the PBM paid to the pharmacy through spread pricing.
West Virginia Ends Use of PBMs
In 2017, West Virginia stopped using PBMs altogether after an audit revealed that public employee health plans were charged 1 percent more for prescription drug claims than PBMs were paying pharmacies. Lawmakers determined the 1 percent cost the state $10 million per year.
Instead of using PBMs to administer pharmacy benefits for state workers and Medicaid beneficiaries, West Virginia now acts as its own PBM under a fee-for-service model run by its Bureau for Medical Services’ Office of Pharmacy Services (OPS). In addition to managing the single state preferred drug list, which had previously been used across managed care plans, OPS developed a Preferred Diabetes Supply List. The state pharmacy board estimates that carving out pharmacy benefits from its Medicaid managed care program will save the state $38 million in the first year. Administrative cost savings and modifications to dispensing cost formulas helped achieve those savings.
Vermont Explores a Direct Relationship with a Wholesaler
The Department of Vermont Health Access (DHVA) released a Request for Information (RFI) in September to explore potential savings from establishing a direct relationship with a drug wholesaler. The RFI was in response to a legislative mandate in Act 193 that requires the state to identify opportunities for saving in the prescription drug supply chain. Under this model, payment for drugs would flow directly from DHVA to the wholesaler. Currently, pharmacies purchase drugs directly from wholesalers and are then reimbursed by DHVA. All publicly-funded prescription benefits in Vermont are reimbursed under a fee-for-service model, and pharmacy reimbursement rates are set by the state, not a pharmacy benefit manager. As a result, DHVA makes all payments to pharmacies directly, and not through a third party.
A direct relationship between a wholesaler and the state would allow DHVA to purchase drugs in a manner similar to the 340B Drug Pricing Program model, which may present savings opportunities. DHVA must report its findings to the Vermont legislature by Nov. 15, 2018.
Recent action, both administrative and legislative, reflects states’ growing demand for more transparent pricing and payment models. Learn more about all state action on curbing drug costs at the National Academy for State Health Policy’s Center for State Rx Drug Pricing, a warehouse of resources, including model legislation, new state laws, and legal analysis.
Vermont is the first state in the nation to approve a wholesale program to import lower-cost prescription drugs from Canada, following Gov. Phil Scott’s signing of the landmark law last week. Vermont now begins the task of winning approval from the secretary of the US Department of Health and Human Services (HHS) and implementing its program.
|What federal requirements must Vermont’s importation law meet to win approval?
Vermont carefully crafted its importation law to meet federal requirements. HHS allows programs of wholesale importation of drug from Canada, as long as consumers benefit from lower drug costs, drug safety is assured, and opioids are not among the drugs imported.
The new law establishes checks and balances to guarantee it meets the federally-mandated cost savings and drug safety requirements by:
Guaranteeing safety: Vermont can only purchase drugs only from Canadian government-regulated suppliers.
Achieving savings: Vermont will only import drugs that are expected to generate substantial savings for its consumers. The imported drugs cannot be sold outside Vermont.
Sustainable funding: Vermont will charge a nominal fee on each prescription, or establish another financing mechanism, to ensure that the program is funded in a way that does not jeopardize consumer savings.
Careful oversight: The law requires a “robust” audit and oversight process to guarantee cost savings. The state attorney general will monitor the program for “anticompetitive behavior” by industries that are affected by a wholesale prescription drug importation program.
Vermont’s Agency for Human Services is responsible for applying to HHS for approvals needed to initiate the program, and it will begin implementation within six months of getting state funding and federal approval. Its implementation plan includes the following steps:
Step 1: The state will either become licensed as a drug wholesaler itself or it will contract with a Vermont-licensed wholesaler. Next, it will contract with one or more Vermont-licensed drug distributors who will use existing drug supply chains to provide proper distribution of drugs throughout the state.
Step 2: Vermont will create a registration process for health insurance plans, pharmacies, and health care providers that want to participate in the program.
Step 3: The state will work with payers and others to identify which high-cost drugs are expected to yield the greatest cost-savings to consumers if they’re imported from Canada. It then arranges to import those drugs in bulk from licensed Canadian suppliers.
Step 4: To guarantee pricing transparency and accountability, Vermont will publicize the prices of imported prescription drugs widely, create a marketing and outreach plan, and set up a hotline to answer questions and address the needs of consumers, employers, health insurance plans, pharmacies, health care providers, and others.
Step 5: Vermont will audit the program and report annually to the House Committee on Health Care and the Senate Health and Welfare and Finance committees about which drugs are imported and the number of participating pharmacies, health care providers, and insurance plans. The law also requires detailed reporting from insurance plans about their drug costs and the savings achieved through importation.
NASHP will work with Vermont officials and continue to report on Vermont’s application to HHS and its implementation of the landmark importation initiative.
Read NASHP’s model drug importation legislation, on which Vermont’s new law is based.
View an easy-to-read infographic on the steps required to implement wholesale importation.
Vermont is the first state in the nation to approve importation of less-costly prescription drugs from Canada.
For the first time in the United States, obtaining low-cost prescription drugs from Canada is one step closer to reality today following the Vermont state legislature’s landmark enactment of S.175. Vermont Gov. Philip Scott signed the bill into law on May 16, 2018.
Based on the National Academy for State Health Policy’s (NASHP) model importation legislation, S.175 creates a wholesale importation program to purchase high-cost drugs through authorized wholesalers, who will purchase the drugs in Canada and make them available to Vermonters through an existing supply chain that includes local pharmacies.
The bill passed the Vermont House by a 141-2 vote and the Senate unanimously approved it yesterday.
Vermont Senate President Pro Tem Tim Ashe commented, “It is outrageous that a commonly used medicine like Lipitor costs 46-times more per pill in the United States than in Canada. In fact, legislative staff determined that importing just two diabetes drugs from Canada would save the state’s teacher health insurance plan more than $500,000 each year.
State Sen. Claire Ayers and state Rep. Bill Lippert and Ashe worked to carefully shepherd the bill through both houses. The bill requires Vermont’s Agency for Human Services, in consultation with stakeholders and the federal government, to design and submit an importation proposal to the state legislature on or before Jan. 1, 2019 and further requires the agency to submit its proposal to the federal government on or before July 1, 2019, for final approval. The importation program must be operational within six months of approval of the financing strategy, certification, and federal government sign-off.
The proposal will identify the high-cost drugs to be imported from Canada and detail how the program will be implemented. The legislation directs the agency to recommend a financing mechanism, either through a per-prescription charge or another method, to ensure the program is funded in a manner that does not jeopardize the significant consumer savings that are expected. Based on that recommendation, the legislature will enact a funding mechanism during its next session.
Giving the Agency for Human Services time to develop an implementation plan guarantees the legislature will have the information needed to establish the funding mechanism and address questions that arose during legislative deliberations, including what provisions can be in adopted to make sure that Vermont’s eligibility for the federal 340B drug discount program, which requires drug manufacturers to provide outpatient drugs to eligible health care organizations at significantly reduced prices, is not jeopardized.
“In the absence of federal action to control the cost of prescription drugs, states can’t wait, they need to control drug costs now for all of their citizens,” said NASHP Executive Director Trish Riley. “Vermont’s legislature has taken an important step in lowering prescription drug prices that we hope will serve Vermonters well and inform the federal policy debate.”
Across the country, a total of nine legislatures introduced drug importation bills this year. While Utah did not enact its proposed importation law, its legislature requested the state’s executive branch to develop a proposal so the legislature could, based on the proposal, re-introduce a wholesale importation bill next session. Utah’s study and Vermont’s implementation planning process are similar in their design and approach.
NASHP is working with states to advance wholesale importation programs that can be approved by the federal government and implemented to generate savings and guarantee safety to the citizens they serve.
For more information on drug importation, read Is It Safe and Cost-Effective to Import Drugs from Canada?
As states reach the midway point of their 2018 legislative sessions, many are looking for ways to stabilize their insurance marketplaces now that Congress has effectively eliminated the individual mandate that required all residents to be insured or pay a penalty. Without guaranteed participation by healthier consumers, marketplaces risk having more high-cost consumers in their pools, which will drive up premiums and destabilize markets.
|How would a state individual mandate work?
View the Feb. 7, 2018, webinar featuring Massachusetts officials explaining how they did it here.
Several states are considering implementing a state-based mandate, with bills proposed in Hawaii, Maryland, New Jersey, Vermont, and Washington. Connecticut recently released a study about the effect of a mandate and a Washington, DC, working group has adopted a recommendation to implement a mandate. Policymakers are looking carefully at how Massachusetts, which has the lowest uninsured rate in the country, implemented its mandate 11 years ago.
Key Lessons Learned from Massachusetts
Earlier this month, the National Academy for State Health Policy (NASHP) hosted a webinar to explore implementation of a state-based mandate. During the event, Massachusetts officials described their mandate and identified three key elements that state policymakers should consider. (View Massachusetts’ webinar slides here.)
- Coverage standards: What is the minimum standard of coverage that individuals must purchase in order to be considered insured and avoid a penalty?
- Affordability standards: Are there limits that should be put in place to exempt consumers from having to purchase coverage that is unaffordable?
- Penalties/exemptions: What should the penalty be for individuals who do not purchase coverage? What exemptions should be offered to avoid the penalty? How should penalty revenue be used?
State officials also discussed operational considerations when crafting a mandate, including:
- Cost and governance: What agencies should have authority over monitoring and enforcement, and at what cost?
- Outreach and education: What educational and outreach efforts are required to ensure that consumers are adequately informed about the mandate? When and how should educational efforts occur?
Massachusetts officials described the mandate as an “integral” part of their overall coverage strategy. They explained that the mandate has provided many indirect benefits to their state. Notably, the detailed information the program has provided about consumers who lack coverage has enabled the state to design effective policies and fine-tune outreach strategies to reach these consumers and enroll them in affordable programs.
Officials also described the benefits of instituting a common benefit “floor” for coverage, which has helped Massachusetts:
- Provide a quality standard of coverage that benefits all consumers; and
- Insulate the state’s insurance market from detrimental fragmentation, and consumer gaming that can be exacerbated by the existence of limited coverage options.
Such system gaming may be of particular concern pending recently proposed federal actions to grant greater flexibility over short-term and association health plans.
Massachusetts officials acknowledged the difficulty of measuring the direct impact of the mandate on reducing the number of uninsured. The state’s mandate evolved over time and did not occur in isolation. It was part of a package of reforms designed to improve affordability and access in Massachusetts. Collectively, these policy decisions have resulted in Massachusetts achieving the lowest uninsured rate in the country (currently at 2.5 percent). Recent data released by Massachusetts’ Health Policy Commission show that Massachusetts has the second-lowest average premium costs for benchmark plans sold through its exchange, a clear sign of market stability.
Ultimately, any state considering a mandate must decide how to balance each of these considerations based on its intent to:
- Improve affordability and stability;
- Establish a quality standard for required coverage; and
- Ensure the program is not overly burdensome on consumers or state systems.
Maryland’s Proposed Health Insurance Escrow Fund
Democratic state legislators in Maryland have sponsored legislation (SB 1011/HB 1167) that would use Maryland’s health insurance exchange to automatically enroll individuals in health insurance plans. The proposal is based on a concept developed by Stan Dorn, a senior fellow at Families USA, under which Maryland would institute an individual mandate and imposepenalties for lack of coverage. Under this model, consumers could use the penalties they owe to purchase future coverage. As described by Dorn, the intent of this proposal is to ensure that penalties are used to help individuals purchase coverage to the maximum extent possible. During NASHP’s webinar, Dorn outlined four phases of this plan:
- Open enrollment “pre-payment:” During the open enrollment season, consumers would come into the exchange and estimate the amount of penalty they would owe during their next tax filing for not purchasing coverage. The consumer can then opt to “pre-pay” this penalty to the exchange, and apply that payment toward the purchase of insurance coverage.
- Tax season: Upon filing tax returns, consumers would be asked to self-identify whether or not they were insured on their tax form. If they were uninsured and owed a penalty, consumers could choose to have the penalty used to purchase insurance. At this point, the exchange would check to see if the consumer was eligible for coverage at zero-cost, meaning that when tax credits and the penalty are applied, the consumer would owe zero in monthly premiums for the plan. If a zero-cost plan is available, the consumer would be automatically enrolled in that plan.
- Post-tax season: If consumers do not qualify for a zero-cost plan, their penalty would be held in escrow until the next open enrollment period. At that point, consumers can apply the penalty toward the purchase of coverage for the following year.
- Continuation of coverage: If consumers decide to drop coverage before the full year, the state keeps any amount of the penalty left after payments are made to insurers for whatever months the consumer was covered. Any penalty funds collected would be used to finance operation of this program, and to help fund a reinsurance program to help defray the cost of insuring high-cost consumers.
The Maryland proposal raises questions about consumer behaviors, underscoring that successful implementation requires the development of sufficient tools and resources to ensure that consumers can adequately make decisions about whether to use of their penalty toward the purchase of coverage. The legislation proposes an ambitious timeline for implementation, mandating that it become fully operational by Jan. 1, 2020. The Maryland exchange have not officially taken a position on the model, though legislators are consulting with them to assess the feasibility of the plan.
As states pursue a wide range of legislation to address rising drug costs, four more states have joined Utah and Vermont to introduce bills to import prescription drugs from Canada through a state-run, wholesale operation.
This market-based approach to providing more affordable medicines from Canada, where prescription drugs cost on average 30 percent less than in the United States, is appealing to a politically diverse group of states, and is currently under review by legislators in:
- Colorado (S 80);
- Missouri bill studies the creation of an importation program (SB 722);
- Oklahoma (SB 1381);
- Utah (HB 163);
- Vermont (S 175); and
- West Virginia (HB 4294).
A fiscal analysis recently completed in Utah indicated the potential for millions in reduced spending due to the significant price differences between certain products sold in the United States and Canada. This month, NASHP is convening state legislative sponsors to share information and expertise about the importation policies in their states. Many of the importation bills currently under review are based on National Academy for State Health Policy’s (NASHP) model legislation.
If an importation bill passes in a state legislature and is signed into law by the governor, the next step is to seek certification from the US Health and Human Services Secretary Alex Azar by proving that the state’s importation program meets federal requirements to ensure both product safety and consumer savings.
NASHP’s model legislation was designed to meet federal requirements by taking the form of a state-administered system of wholesale importation and distribution limited to pharmaceuticals from Canada. States can decide whether to purchase lower-cost drugs for public programs only, or to expand the importation initiative to also serve commercial health plans.
The program’s imported drugs would be safe and would produce savings because a state would:
- Select only Canadian suppliers who are licensed and regulated under Canadian law;
- Select only drugs to be imported that are already approved for the Canadian market;
- Provide the drugs only to distributors, pharmacies and other dispensers, and health plans, that volunteer to participate in the program. Participants would agree to purchase and reimburse drugs at the import price and patients would share the cost savings and pay the import price as well. The imported drug costs would be made publicly available to create greater drug pricing transparency for consumers;
- Ensure that the imported products are distributed in-state only; and
- Monitor/audit the system for compliance, safety, and savings.
When Rhode Island health policymakers read the U.S. Centers for Disease Control and Prevention’s Healthy People 2010 report, they realized their children’s generation could face a shorter life expectancy than their own unless they changed their approach to public health. In response, Department of Health officials doubled down on their commitment to address health disparities and improve the social factors that directly affect health, such as housing and nutrition.
At the same time, they understood they needed a new financial approach to support their growing focus on improving health and health equity and reducing obstacles such as poverty, discrimination, poor education, and unsafe environments. Their solution: braided funding from a number of sources to help realign staff, break down organizational silos, and promote cross-sector collaboration.
The department first tested its innovative, collaborative approach through integrated projects, such as bringing together staff from diabetes, obesity, and maternal and child health programs and recruiting community partners to work on a shared initiative. When those initial projects proved successful, they took stock of their funding sources and looked for opportunities to divest from disease-specific funding sources and invest instead in more community-focused funding.
“Where is the funding for doing this kind of work?” observed Ana Novais, executive director of health in Rhode Island’s Department of Health. “There is no health equity funding being given to us, but nearly every proposal or grant we receive mentions health disparities.”
Rhode Island ultimately designed a method for “braiding” together funds from several sources to support its work to improve health equity. Officials wove together federal funds from the Maternal and Child Health Bureau of the Health Resources and Services Administration, the Substance Abuse and Mental Health Services Administration, the Preventive Health and Health Services Block, and two different chronic disease grants from the U.S. Centers for Disease Control and Prevention. They combined these federal funding streams with state funds, designed their work plan to meet both the department’s health equity goals as well as the various federal grants’ requirements, and then requested proposals from community organizations to improve health equity.
Novais explained the proposal asked communities to define themselves as health equity zones and submit proposals to prevent chronic diseases, improve birth outcomes, and improve the social and environmental conditions of neighborhoods across the state. See NASHP’s In the Zone for more about Rhode Island’s work to advance health equity and community health.
Novais recently shared her expertise and experience when she chaired a session on braiding and blending funds for improved population health at the annual 2017 NASHP state health policy conference held in late October. The session, presented in partnership with the de Beaumont Foundation, also featured state officials from Louisiana, Vermont, and South Carolina. Each state uses innovative braiding or blending models to address non-clinical health needs that affect public health through programs such as supportive housing and nurse home visiting for low-income, first-time mothers.
These innovative strategies may become even more important — and more widespread — in the wake of federal proposals to create block grants and cut state public health funding. A number of state health policymakers expressed concern that the flexibility provided by block grants may not adequately compensate for cuts to already lean public health budgets. To help state health policymakers prepare for and respond to such proposed changes, NASHP, the de Beaumont Foundation, and the Association of State and Territorial Health officials recently convened a group of state health policymakers from 11 states to strategically address opportunities and challenges that may result from potential changes to the federal funding landscape.
A new NASHP report, Blending, Braiding, and Block-Granting Funds for Public Health and Prevention: Implications for States, charts a way forward for states interested in maximizing their abilities to coordinate work and resources across programs. It distils ideas from the recent meeting of state leaders and explores state responses to possible federal funding scenarios. The report also:
- Surveys historic and existing sources of block grants and disease- or condition-specific federal funding;
- Examines how states currently use those funds; and
- Poses key questions for officials to ponder in the months ahead.
In this time of rapid policy changes, it is important to learn from states working to align their funding sources to advance their population health and prevention goals. “This paper is an important and much-needed resource for state officials seeking to improve health and health equity by investing in building stronger, healthier, and more resilient communities during this time of change,” said Novais.
Presented in partnership with the de Beaumont Foundation.
As federal officials hint at overwhelming changes in how state health programs will be funded in the future, policymakers are strategizing how to reconfigure their programs to take advantage of the promised brave new world of flexibility and realigned funding. The National Academy for State Health Policy (NASHP), the de Beaumont Foundation, and the Association of State and Territorial Health Officials recently convened a small group of state health policymakers from 11 states to strategically address opportunities and challenges that may result from changes to the federal funding landscape.
The meeting produced a new paper, Blending, Braiding, and Block-Granting Funds for Public Health and Prevention: Implications for States, that charts a way forward for states interested in coordinating work and resources across programs.
“This paper is an important and much needed resource for state officials seeking to improve health and health equity by investing in building stronger, healthier, and more resilient communities during this time of change,” said Ana Novais, executive director of health at the Rhode Island Department of Health. To learn more about Rhode Island’s innovative financing to advance health and health equity, read this blog.
The 2017 annual NASHP state health policy conference also addressed braiding and blending funds for improved population health. The session, presented in partnership with the de Beaumont Foundation, featured officials from Rhode Island, Louisiana, Vermont, and South Carolina. Each state uses innovative braiding or blending models to address population health and non-clinical health needs through programs such as supportive housing and nurse home visiting for low-income first-time mothers. Read more.
Presented in partnership with the de Beaumont Foundation