Tag Archives: Pharmacy Savings

PCMA President Mark Merritt Discusses Medicaid Pharmacy Savings on Bloomberg Government News

PCMA President Mark Merritt discussed Medicaid pharmacy savings in a recent interview with Bloomberg Government News. Following is an excerpt from that interview:

 

We’re at the real front end of that even though there’s not a lot of managed care in Medicaid. There’s been much less managed drug benefits, in that even when there was a managed care company coming in to manage Medicaid benefits, the drug benefits were and still largely are unmanaged. So there are a lot of savings there and it’s a lot of easy savings for governors to get where you don’t have to cut benefits for patients or kick people of the roll or slash doctors or hospitals more. It’s just kind of getting drugstore payments in line with what everybody else is paying them. So there’s billions and billions of dollars to be saved there and there’s a growing demand for modernization in the Medicaid pharmacy space by governors of all different political stripes. It’s still a learning process for them. 

 

Here is the expanded Q&A:

 

BNA:  What tools can Medicaid use to save on pharmacy costs?

 

Merritt: 

 

Well, it’s really interesting, I think really for the last 20 years, people have viewed Medicaid pharmacy as almost an irrelevant side issue because of the drug rebates, the statutory rebates, the state Medicaid programs get from the brand companies. There’s all this focus on the rebates for the unit costs of the actual prescription drugs but no focus on the rest of the drug cost, namely how the drugs are delivered, the pharmacy cost, the formulary management, the use of incentives to get greater, higher use of generics and things like that.

 

Medicaid pharmacy has been slowly evolving from a strictly fee-for-service model, basically an unmanaged benefit, to one where there’s more management of it. One of the reasons there was some reluctance was because before the ACA [Affordable Care Act] became law, the state wasn’t guaranteed to have access to all the drug rebates if they brought in a third party to manage the benefits and negotiate the discounts with drug companies. ACA changed that so even if states use a PBM, they can still get access to 100 percent of the rebates.

 

And so, we’ve done studies, really off CMS data, to show a) the savings that states will have from managing their benefit, and b) showing there’s a wide disparity among states in terms of how much they pay drugstores for both the dispensing fee, the fee for every prescription that’s filled, and then the amount that drugstores are reimbursed for each drug that they dispense. [In May, PCMA released a study that said better management of drug benefits in the Medicaid program could save $74.4 billion from 2014 to 2023 (11 PLIR 608, 5/10/13).]

 

Now governors are seeing that there are a lot of savings in Medicaid because drugstores are actually paid more by most Medicaid programs than private insurers pay or Medicare pays. We did a 50-state breakout showing that, for instance, New Hampshire is paying three times less than Texas for pharmacy dispensing fees for Medicaid patients. And when governors start seeing that kind of information, they say, well look, I don’t want to be paying more than the guy next door. And so you have governors as disparate as [Andrew] Cuomo in New York to Rick Perry in Texas introducing modernization tools, a lot of the tools that are used in Part D and certainly by Fortune 500 companies, bringing them into Medicaid to save money.

 

We’re at the real front end of that even though there’s not a lot of managed care in Medicaid. There’s been much less managed drug benefits, in that even when there was a managed care company coming in to manage Medicaid benefits, the drug benefits were and still largely are unmanaged. So there are a lot of savings there and it’s a lot of easy savings for governors to get where you don’t have to cut benefits for patients or kick people of the roll or slash doctors or hospitals more. It’s just kind of getting drugstore payments in line with what everybody else is paying them. So there’s billions and billions of dollars to be saved there and there’s a growing demand for modernization in the Medicaid pharmacy space by governors of all different political stripes. It’s still a learning process for them.