Because of skyrocketing prescription drug prices, some state Medicaid programs and prison systems are limiting certain drugs to only the sickest patients. Some states are negotiating better pricing.
By Michael Ollove
The new hepatitis C drug Sovaldi promises a cure rate of well over 90 percent, compared to 45 percent (at best) for older drugs. But when Sovaldi went on the market earlier this year for as much as $84,000 for a single course of treatment, critics blasted the cost as “exorbitant” and “gouging.”
It is estimated that between 3.2 million and 5.2 million Americans have hepatitis C, an infectious illness that can eventually compromise the liver.
The disease falls disproportionately on the poor and the incarcerated, which makes it a particular challenge for Medicaid, the federal-state health plan for the poor, and for state prison systems.
One study by Express Scripts, a drug benefits management company, estimated it would cost states $55 billion to provide Sovaldi to all prisoners and Medicaid beneficiaries with hepatitis C.
Because of its high cost, some state Medicaid programs and prison systems are refusing to provide Sovaldi to any but the sickest patients. Most recently, Oregon last month threatened to limit access to the drug unless it can get Sovaldi at a deeply discounted price.
“Sovaldi is a seminal event,” said Matt Salo, executive director of the National Association of Medicaid Directors. “It’s clear that states are not equipped to handle this. They simply do not have the tools to maintain control.”
But Sovaldi is only the beginning. Expensive new treatments for certain cancers, rheumatoid arthritis and other conditions also have rattled Medicaid officials, patients and health care providers.
What can states do to hold down drug costs? Drug pricing is a complicated and opaque process. Here are some of the basics.
Question: Is each state Medicaid program on its own when it comes to drug pricing?
Answer: Not completely. The federal Omnibus Budget Reconciliation Act of 1990 mandates that drug makers give all Medicaid programs a 23 percent rebate off the Average Manufacturers Price (AMP) for all prescription drugs purchased, or the difference between the AMP and the best price given to a private payer. (Prisons aren’t covered by this discount provision and have to negotiate drug prices as any retailer does.)
In return for the rebates, Medicaid programs must carry all drugs approved by the U.S. Food and Drug Administration on their “formularies,” which is the list of the medications each health plan will pay for. That guarantee means that the drug makers get access to substantial markets in all 50 states and the District of Columbia. Continue reading