The first in line are nearly half a million people who are covered by a Medicaid managed care plan
December 8, 2010 -- It’s no secret that large purchasers can demand bigger discounts from pharmaceutical companies which, in turn, offer generous rebates.
Oregon’s headed down that road by creating a statewide preferred drug list of generic and brand-new drugs.
Such a concept is tucked away in legislation passed in 2009 (House Bill 2009). Eventually, that drug list will impact 850,000 Oregonians, including those on the Oregon Health Plan, Healthy Kids, the Public Employees Benefit Board and the Oregon Educators Benefit Board.
The law doesn’t stipulate a starting date, but the Medicaid managed care plans are definitely first in line, with discussions already under way.
A statewide preferred drug list is expected to be in place sometime in 2012 for close to half a million people covered by the Oregon Health Plan, according to Tom Burns, director of pharmacy programs for the Oregon Health Authority.
“From the review process started by Governor-elect Kitzhaber 16 years ago, there’s no difference on how many of the same drugs work in the body and treat the disease,” Burns said. “If there’s no difference, then why not start with the cheapest drug? If the doctor discovers a problem and the drug isn’t working, then the drug can be changed. That’s far different than what happens now when the doctor writes whatever script is put into this mind by a sales representative from a pharmaceutical company or what the patient saw on television the night before.”
But, asked Dr. Rick Wopat, medical director of Samaritan Health Services, aren’t the pharmaceutical companies smarter than the health plans when it comes to prices and rebates?
They can outwit the health plans, he said, by creating havoc and changing the amount they pay in rebates every year, which impacts everyone’s bottom line. “They have a lot more experience on how to play this game than we do. We’re still trying to figure out the smoke and mirrors of pharmacy benefit management companies.”
Dr. Lyle Jackson, medical director of Mid-Rogue Health Plan, voiced a similar concern. “Rebates are always changing; we’re better off saving money than chasing individual brand-name drugs with better rebates.”
But the Affordable Care Act changed the nature of drug rebates. Manufacturers must now pay rebates to state Medicaid agencies, and, can, if they prefer give similar rebates to managed care plans, which is extremely unlikely. “Why would they pay double rebates?” Burns asked.
Nevertheless, the health plans are still on the hook for the cost of these drugs. “We have to somehow or other build in incentives for the plans to use a preferred drug list since we collect the rebates, and we get all the discounts,” Burns said.
In return, state officials have begun sharing those rebate dollars with the health plans.
Burns anticipates Oregon will receive $25 million every year from such rebates, however a huge proportion of those dollars – as much as 80 percent – must be returned to the federal government since it provides .67 cents of every Medicaid dollar.
“One of the problems we’re having now is that we don’t know how much of that $25 million we actually get to keep,” Burns said.
The federal government also restricts the ability of drug companies from raising their prices dramatically for Medicaid programs. “Prices are much more stable than in the commercial world,” he said.
Currently the 15 Medicaid managed care plans have their own evidence-based preferred drug list. “The goal is to establish a statewide preferred drug list; we’re asking the plans to find common ground,” Burns said. For example, does Lipitor or Crestor offers the best treatment for high cholesterol?
No one doubts such restrictions can save money, said Burns, who points to $5 million in savings since 2009 after a preferred drug list was created for 30 drug classes for the 89,276 people on fee-for-service Medicaid. In January, another 50 drug classes are expected to join that list.
The governor’s office is also getting into the action, and intends to introduce legislation to create a pharmacy and therapeutics committee of physicians, pharmacists and consumers to establish the statewide preferred drug list.
“We need to create this preferred drug list in a public and open process; this group will make the final decisions and have access to prices,” Burns said. “Obviously doctors are the ones who prescribe. If the doctor is insistent that the patient needs a drug not on the list, there are escape valves built in.”
Mental health drugs are an entirely different matter. Although officials have come up with a preferred drug list, there’s a hitch. That list cannot be enforced unless legislators change the statute. In previous sessions, legislators have yielded to consumer advocates who’ve vigorously opposed restrictions on mental health drugs.
If those restrictions are lifted, the state could save $6 million in general fund and another $13 million in federal matching dollars over an 18 month time span, Burns said.
The Medicaid managed care plans aren’t eager to assume the financial risk for mental health drugs. “That’s the last thing I want,” Jackson told Burns. “Make mental health organizations responsible. If they’re financially responsible, they’ll buy into it.”
Further down the road sits the Public Employees Benefit Board and Oregon Educators Benefit Board which eventually will have a statewide preferred drug list.
However, those discussions are far more complicated with co-payments and deductibles entering into the picture. To start the process, Burns is doing a comparison of drug utilization data. A public employee, for example, can get a generic drug such as Zolpidem, a generic sleep medication at no cost, but must make a co-payment to get Ambien, the brand-name drug.
“People on Medicaid don’t have that option – therein lies the problem when building a benefit,” Burns said. “There may come a time when from the taxpayer’s point of view it is better to cost PEBB a little more money for the same drugs because we can save a whole lot more money on Medicaid by negotiating very good discounts assuming the drugs have the same efficacy and safety. Both are taxpayer funded. And the bigger the pool, the more money we can save. Manufacturers give us better than the best price amount for Medicaid drugs.”
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