Upgrading Medicaid Drug Benefits Could Save New York $3.7 Billion
A new report estimates that upgrading management of drug benefits in New York’s Medicaid program could save $3.7 billion without reducing access or the quality of benefits patients receive. The report shows that New York and other state Medicaid programs could make more use of the tools Medicare, unions, and employers rely on to curb wasteful pharmacy spending.
Components of potential savings for New York include:
- Using limited pharmacy networks: In most state Medicaid programs, every drugstore in the state is entitled to participate. State Medicaid programs could achieve greater savings by using a competitive process and negotiating better discounts from select drugstores that wish to participate in a limited pharmacy network.
- Increasing the use of generic drugs: In terms of formulary management, state-administered Medicaid programs are often less aggressive than other programs when it comes to promoting generics. In New York, the average generic dispensing rate in the Medicaid fee-for-service (FFS) setting is 67%, compared to an average generic dispensing rate exceeding 80% in managed Medicaid settings.
- Negotiating market-based pharmacy dispensing fees: At up to $3.50 per prescription, the average dispensing fee that the New York Medicaid FFS program pays to retail pharmacies is significantly higher than average dispensing fees (approximately $2) paid by Medicare Part D plans, Medicaid managed care organizations (MCOs), and other health plans.
- Encouraging the use of more affordable, preferred brands: Through more active formulary management, the New York Medicaid FFS program could promote greater use of more affordable, preferred brands.
- Reducing drug diversion, polypharmacy, fraud, and waste: Medicaid plans that are more actively managed detect patterns of fraud through use of tools like step therapy, audits, and pharmacy lock-in programs to help detect and avoid inappropriate utilization.