Trump Wants Medicaid to Push for Lower Drug Prices—But Will Patients Be Hurt?

Prescription drugs

Prescription drugs Shutterstock

 

Connecting state and local government leaders

Five states will be able to experiment with negotiating directly with drugmakers to lower prices. They can also close their formularies, so they don't need to cover all prescription drugs.

This article was originally published by Stateline, an initiative of The Pew Charitable Trusts, and was written by Michael Ollove.

A little-noticed part of President Donald Trump’s plan to reduce prescription drug prices could change the way Medicaid has paid for drugs for nearly 30 years.

The change might save taxpayer dollars—but it also could make it more difficult for people with certain conditions to get the medicines that work best for them.

Under Trump’s new plan, five pilot states will have the power to negotiate directly with drugmakers rather than adhering to the national price formula. And Medicaid programs in those states would be exempt from the requirement that they cover all FDA-approved drugs—an out that could mean huge savings if states refuse to pay for expensive medications.

According to federal data on health spending, Medicaid spending on prescription drugs rose by 63 percent between 2010 and 2016, although the rate of increase has also slowed considerably since 2014. Much of the surge in spending can be attributed to the 16 million more people who were able to enroll in Medicaid under the Affordable Care Act.

Medicaid already pays comparatively low prices. According to a study this spring by Altarum, a nonprofit health consulting and research company, Medicaid paid 39 cents on the dollar for prescription drugs compared with 69 cents for Medicare Part D, the prescription program in the health plan for the elderly, and 84 cents for private insurance companies.

Rebate System

Under federal law, manufacturers are required to give rebates to Medicaid for prescription drugs. The rebates are either 23.1 percent of the average manufacturer’s price for the medication or the difference between the average manufacturer’s price and the cheapest price paid by any buyer, whichever is greater.

Medicaid gets an additional discount if a drug’s price rises faster than inflation. Another administration proposal would remove the cap on inflation-related discounts for drugs whose prices more than doubled.

In addition, state Medicaid agencies negotiate supplemental rebates in return for their agreement to give preferential treatment to selected drugs.

Pharmaceutical companies are willing to put up with these conditions so Medicaid agencies will carry their drugs on their formularies, their lists of covered drugs. More than 70 million people are enrolled in Medicaid or the related Children’s Health Insurance Program—a huge market that drugmakers are eager to tap.

The pilot program would scrap the rebate system and allow state Medicaid agencies to exclude certain FDA-approved drugs from their formularies. If a drug company didn’t offer a low enough price, the Medicaid agency could leave its drug off its formulary. The five pilot states have yet to be chosen.

Massachusetts officials submitted a similar proposal to the U.S. Centers on Medicare and Medicaid Services. Their idea is that having a closed Medicaid formulary will allow negotiators to extract better prices from drugmakers.

Arizona officials also have expressed an interest in closing its formulary.

Under Massachusetts’ proposal, its Medicaid agency would be able to exclude prescription medicines if it offered at least one medicine in every “therapeutic class,” that is, treatments intended to address a specific condition or illness, such as blood clots or angina.

Its plan also seeks authority to evaluate the effectiveness of newly introduced drugs compared with other medicines in the same class, information state negotiators could use in talks with drugmakers.

'Going to Get Crushed'

But some health policy analysts worry that consumers will be hurt if Medicaid agencies are able to drop medications that treat some patients’ conditions or illnesses better than others.

“My concern is that if a drug was clinically effective, you wouldn’t want to see a state exclude it solely based on cost,” said Edwin Park, a research professor at Georgetown University’s Health Policy Institute.

Some organizations that advocate on behalf of people with particular illnesses, such as cancer and heart disease, have joined the lobbying arm of the drug manufacturers, Pharmaceutical Research and Manufacturers of America, in objecting to Massachusetts’ application.

Although the drugmakers’ group hasn’t responded to the president’s Medicaid proposals, Matt Salo, executive director of the National Association of Medicaid Directors, said he expects drug company lobbyists will descend on the states participating in the pilots to obstruct changes to the rebate formula.

“The states who step up to the plate on this are going to get the entirety of the lobbying agenda of all of pharma brought to bear on them, and they are going to get crushed,” Salo said. “And it’s not going to work.”

Commercial insurers and the Veterans Health Administration already have closed formularies, but it’s unclear whether they lead to lower prices or improved health outcomes.

While 74 percent of closed formularies result in lower prices, 21 percent result in price increases, a 2016 report in the American Journal of Managed Care found. And 29 percent of patients were affected by formulary exclusions.

Analysts do say that if Medicaid abandoned its current “best price available” requirement, that change could have a beneficial effect on the rest of the market. Drugmakers are wary of offering commercial or even Medicaid plans a best price for fear they’d have to make that price available to all Medicaid agencies.

“Companies often argue that they are unable to provide discounts to private payers because of Medicaid’s best price requirement,” said Rachel Sachs, an associate professor of law at Washington University in St. Louis and an expert on drug regulation. “But we created the best price program for a reason. We wanted public payers, particularly those that function as a safety net, to pay the lowest price.”

While Sachs and other analysts are skeptical that the Trump Medicaid proposal will lower drug prices, they hope that it will help policymakers identify solutions to one of the key budget breakers in Medicaid: the introduction of specialty drugs for specific conditions that carry unprecedented price tags, sometimes in the hundreds of thousands of dollars a year.

While many experts think the rebate system has served Medicaid well, it hasn’t proved as useful with extraordinarily high-priced specialty drugs, particularly when those drugs have no competition.

“There are many drugs that continue to strain state budgets,” Sachs said, “drugs they feel they shouldn’t have to pay so much for.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.