Survey of State Medicaid Drug Programs Finds Sharpened Focus on Costs and Value; Recent Federal Program Changes in Medicaid and Medicare Have Not Alleviated Financial Pressure

Survey of State Medicaid Drug Programs Finds Sharpened Focus on Costs and Value; Recent Federal Program Changes in Medicaid and Medicare Have Not Alleviated Financial Pressure

Contact: Lindsey Spindle, 202.207.1337, lspindle@avalerehealth.net

11.14.06

Washington, DC – The National Association of State Medicaid Directors (NASMD) and Avalere Health have released a comprehensive survey on state Medicaid pharmacy policies. With responses from 47 Medicaid programs, the survey represents an expansive state-based view of current Medicaid pharmacy and practices to date.

Medicaid program coverage of pharmaceuticals has changed dramatically in light of the new Medicare Part D pharmaceutical benefit and the new flexibility granted to states in running their Medicaid programs under the Deficit Reduction Act of 2005 (DRA). The NASMD/Avalere survey provides a timely snapshot of state Medicaid programs’ opinions on how Part D and the DRA have impacted state management of pharmacy benefits and drug reimbursement practices. Among the major findings of the report:

Most states report the Medicare Part D drug benefit has not helped them financially. Many analysts believed that the new federal responsibility for individuals who are eligible for both Medicaid and Medicare would reduce state spending. In fact, some states spent more money by supplementing Medicare Part D coverage for certain low-income beneficiaries.
Two-thirds of states do not expect the DRA to reduce their spending on pharmacy benefits. The DRA, when enacted, was trumpeted as a vehicle by which states have wider flexibility to adjust certain health benefits, thus potentially reaping greater savings. While states wait for CMS guidance on major provisions of the DRA, most states are skeptical that these changes will reduce their costs.
Bulk purchasing is attracting state interest, but remains controversial. Over a quarter of states participate in or are considering joining bulk-purchasing pools as a way to more effectively control their pharmacy costs. States that have chosen not to participate in bulk-purchasing pools, however, challenge their utility, arguing that pool participation will not likely reduce pharmacy costs or increase administrative efficiencies.
It takes more than one approach to control costs. States report using a variety of mechanisms to manage both cost and use of prescription drugs, while coordinating such efforts with evidence-based pharmacy quality programs.

“State pharmacy policies and practices bear a direct impact on the healthcare provided to Medicaid beneficiaries, overall state finances, and the healthcare industry,” said Jon Blum, a vice president at Avalere Health and contributing author to the report. “This report provides an indication how states are shaping their pharmacy policies to balance the tension between providing high quality benefits and managing costs.”

Approximately 55 million people – or 19% of the entire US population – are Medicaid beneficiaries. Their drug needs can be profound: Medicaid beneficiaries, on average, take anywhere from 3.3 prescriptions a month to 7.2 a month for those residing in institutional settings. In 2004, Medicaid programs spent $36.6 billion on prescription drugs, which equals 12.5% of total Medicaid spending.

The full report is entitled “State Perspectives on Emerging Medicaid Pharmacy Policies and Practices.” Avalere staff Andrea Kastin, Mike Cheek, and Jon Blum contributed to the development and analysis of the state survey.

Avalere Health is an advisory services company whose core purpose is to create innovative solutions to complex healthcare problems. Based in Washington DC, the firm delivers research, analysis, insight, and strategy for leaders in healthcare business and policy. Avalere's experts span 170 staff drawn from the federal government (e.g., CMS, OMB, CBO, and the Congress), Fortune 500 healthcare companies, top consultancies, and nonprofits. The firm offers deep substance in areas ranging from healthcare coverage and financing to the changing role of evidence in healthcare decision-making. Its focus on strategy is supported by a rigorous, in-house analytic research group that uses public and private data to generate quantitative insight. Through events, publications, and interactive programs, Avalere also translates real-time healthcare developments into actionable information.

Learn more at www.avalerehealth.net.

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