State initiatives on prescription drugs: Creating a more functional market

Health Affairs

Volumn 22, Issue 4, 2003, Pages 128-136

[No Author Info available]

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; DRUG COST; DRUG INDUSTRY; DRUG LEGISLATION; ECONOMICS; HEALTH CARE DELIVERY; HEALTH CARE PLANNING; HEALTH CARE POLICY; LEADERSHIP; LEGAL ASPECT; MEDICAID; ORGANIZATION AND MANAGEMENT; PRESCRIPTION; UNITED STATES;

DRUG COSTS; DRUG INDUSTRY; ELIGIBILITY DETERMINATION; HEALTH CARE REFORM; HEALTH SERVICES ACCESSIBILITY; LEADERSHIP; LEGISLATION, DRUG; MEDICAID; PRESCRIPTIONS, DRUG; STATE HEALTH PLANS; UNITED STATES;

EID: 0042662810     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.22.4.128     Document Type: Review

References (41)

1. The fastest-growing spending category in the National Health Accounts in 2001 was prescription drugs. At 15.7 percent, it was nearly double the overall rate of increase of health spending. K. Levit et al., "Trends in U.S. Health Care Spending, 2001," Health Affairs (Jan/Feb 2003): 154-156.
2. According to a recent Kaiser Commission survey, forty-five states cited increased drug spending as one of the three most significant factors increasing their Medicaid costs, and twenty-five of those states ranked drugs as the single most significant factor. V. Smith et al., Medicaid Spending Growth: Results of a 2002 Survey (Washington: Kaiser Commission on Medicaid and the Uninsured, September 2002).
3. States are facing a collective budget deficit of $68.5 billion in FY 2004. National Conference of State Legislatures, State Budget Update: February 2003 (Denver: NCSL, February 2003).
4. On dropping services, see P. McMahon, "States Reduce Services, Drop Many from Medicaid Rolls," USA Today, 12 March 2003.
5. L. Korn et al., "Improving Physicians' Knowledge of the Costs of Common Medications and Willingness to Consider Costs when Prescribing," Journal of General Internal Medicine (January 2003): 31-37.
6. 42 USC, Chapter 7, Subchapter 19, Sec. 1396r-8(b)3D. Created by the Omnibus Budget Reconciliation Act (OBRA) of 1990, the Medicaid Drug Rebate Program requires a drug manufacturer to enter into and have in effect a national rebate agreement with the HHS secretary for states to receive federal funding for outpatient drugs dispensed to Medicaid patients. State agencies are prohibited from disclosing the identity of a specific manufacturer or wholesaler and the prices charged for drugs by such.
7. M. Freudenheim, "Documents Detail Big Payments by Drug Makers to Sway Sales," New York Times, 13 March 2003;
8. and M. Freudenheim, "Drug-Plan Manager to Refuse Promotion Money from Makers," New York Times, 18 March 2003.
9. John Folkemer, executive director, Office of Planning and Finance, Maryland Department of Health and Mental Hygiene, personal communication, 27 March 2003.
10. S. Dale and J. Verdier, State Medicaid Prescription Drug Expenditures for Medicare-Medicaid Dual Eligibles, Issue Brief no. 627 (New York: Commonwealth Fund, April 2003).
11. NCSL, "State Pharmaceutical Assistance Programs," www.ncsl.org/programs/health/drugaid.htm (9 April 2003).
12. Detailed descriptions of state programs in Vermont, Maine, Michigan, and Oregon are available by request to mmf@milbank.org.
13. Under the Vermont Pharmacy Discount Program, people enrolled in Medicare, regardless of income and without drug coverage, or any other person with income up to 300 percent of the federal poverty level and without drug coverage was able to purchase drugs at the Medicaid rate and at the time of purchase received an additional discount equal to the expected Medicaid rebate that the state would get from manufacturers under the federal Medicaid drug rebate provisions. In essence, these new Medicaid enrollees were offered this one benefit with a 100 percent copayment. The rebate component resulted in the beneficiary paying 82.5 percent of the discount from retail prices, although the actual amount varied by drug and Medicaid-allowed amount. This translated to an estimated 25 percent below retail. R. Sneyd, "Drug Industry Sues to Block Vt. Program," Rutland Herald, 12 December 2000.
14. Pharmaceutical Research and Manufacturers of America v. Thompson, 251 F.3d 219 (D.C. Cir. 2001).
15. R. Winslow, L. McGinley, and C. Adams, "States, Insurers Prescribe Fixes for Soaring Medication Costs," Wall Street Journal 11 September 2002.
16. "The mechanics of the Maine Rx program are not complex. The Commissioner of DHS...will negotiate with pharmaceutical manufacturers to obtain discounts for qualified residents. The discounts take the form of rebates triggered by each sale of a Maine Rx covered drug to a Maine Rx cardholder at a participating Maine Rx pharmacy. Maine Rx does not mandate any particular rebate amount - the Commissioner is simply to use his 'best efforts' to leverage the State's market power into the most generous discount manufacturers are willing to provide. The initial goal is a rebate equal to or greater than the rebate Maine typically receives when it purchases drugs through its Medicaid program...with an ultimate goal of rebates approximating those provided to the federal government. 22 Me. Rev. Stat. Ann. Sec. 2681(4); Pet. App. 88." Quoted from Pharmaceutical Research and Manufacturers of America v. Concannon, "Brief of Respondents on Writ of Certiorari," 8.
17. Pharmaceutical Research and Manufacturers of America v. Walsh, no. 01-188 (Slip opinion at www.supremecourtus.gov/opinions/02pdf/01-188.pdf (21 May 2003).
18. P. Carrier, "Funds to Start Maine Rx Long Gone," Portland Press Herald, 21 May 2003, 1A.
19. Pharmaceutical Research and Manufacturers of America v. Thompson, 313 F.3d 600 (D.C. Cir. 2002). The court ruled that the secretary of HHS never formally approved the modification of the Maine waiver, which added a 2 percent state contribution. The state had not yet received approval when this paper went to press.
20. In September 2002 the Eleventh Circuit Court of Appeals upheld a lower court ruling approving the Florida law over PhRMA's objections. Pharmaceutical Research and Manufacturers of America v. Meadows, 304 F.3d 1197 (11th Cir. 2002).
21. National Governors' Association, Preferred Drug Lists and Supplemental Rebates: Managing Care and Containing Costs, Issue Brief (Washington: NGA Center for Best Practices, March 2003).
22. The Agency for Healthcare Research and Quality (AHRQ) designates thirteen Evidence-Based Practice Centers around the United States. See AHRQ, "Evidence-Based Practice Centers," March 2003, www.ahcpr.gov/clinic/ epc/index.html (9 April 2003).
23. Jim Edge, acting assistant administrator, Oregon Office of Medical Assistance Programs, personal communication, 31 March 2003. The information is based on data since 1 September 2002. Savings are lower than officials hoped because only four drug classes were at that point subject to the program and the switch rate by physicians was lower than the state had expected.
24. The state reports that its general request for physicians to report cases in which their patients were adversely affected has produced no documented case. David Viele, deputy director of budget and financial administration, Michigan Department of Community Health, personal communication, 25 March 2003. On the other hand, a recent survey of twenty-four advocates reported substantial implementation problems with potential harm to patients. C. Bernasek et al., Case Study: Michigan's Medicaid Prescription Drug Benefit (Washington: Kaiser Commission on Medicaid and the Uninsured, 23 January 2003).
25. Several studies published in peer-reviewed journals have examined the similar reference drug pricing policy in British Columbia, and they have found no adverse effect on patients. See T. Hazlet and D. Blough, "Health Services Utilization with Reference Drug Pricing of Histamine2 Receptor Antagonists in British Columbia Elderly," Medical Care 40, no. 8 (2002): 640-649.;
26. S. Schneeweiss et al., "Outcomes of Reference Pricing for Angiotensin-Converting-Enzyme Inhibitors," New England Journal of Medicine 346, no. 11 (2002): 822-829;
27. and P. Grootendorst et al., "Impact of Reference-Based Pricing of Nitrates on the Use and Costs of Antianginal Drugs," Canadian Journal of Medicine 165, no. 8 (2001): 1011-1019.
28. The state appeals court permitted the program to continue during the litigation, which was ultimately decided in the state's favor. PhRMA v. Department of Community Health, 657 NW 2d 162 (Michigan Court of Appeals, 2002).
29. D. Durbin, " State Discounted Drug Plan Upheld," Detroit Free Press, 29 March 2003.
30. Winslow et al., "States, Insurers Prescribe Fixes for Soaring Medication Costs."
31. West Virginia led the effort, which includes New Mexico, South Carolina, Maryland, Louisiana, Missouri, and Mississippi. J. Wallace, "Proposed Drug Pool to Save $25 Million; Seven States' Plan for Prescriptions Awaits Approval," Charleston Daily Mail, 26 March 2002.
32. P. Landers, "States Jointly Seek Drug Discounts under Medicaid," Wall Street Journal, 20 February 2003.
33. I. Chalmers, L Hedges, and H. Cooper, "A Brief History of Research Synthesis," Evaluation and the Health Professions 25, no. 1 (2002): 12-37.
34. For information on the Cochrane Collaboration, see www.cochrane.org.
35. Segal Company, 2003 Segal Health Plan Cost Trend Survey, 2002, www.segalco.com/publications/surveysandstudies/2003trendsurvey.pdf (9 April 2003).
36. For examples of private-sector use of reference pricing, see J. Bennett, "U.S. Companies Are Examining How Europe Limits Drug Costs," Wall Street Journal, 26 March 2003.
37. Reforming States Group, Information for Accountability in Health Care Purchasing: A Report on Collaboration between the Private and Public Sectors (New York: Milbank Memorial Fund, 1996).
38. NGA, Preferred Drug Lists.
39. U.S. General Accounting Office, Federal Employees' Health Benefits: Effects of Using Pharmacy Benefit Managers on Health Plans, Enrollees, and Pharmacies, Pub no. GAO-03-196 (Washington: GAO, January 2003).
40. T. Craig, "Community Leaders Decry Lobby Firm's Fax," Baltimore Sun, 9 March 2002.
41. For a history of the RSG, see K. Anderson, "The Reforming States Group and the Promotion of Federalism," Milbank Quarterly 76, no. 1 (1998): 103-120.