On October 27, 2016, the Medicaid and CHIP Payment and Access Commission’s (MACPAC) October public meeting, the Commission reviewed strategies for prescription drug cost containment in Medicaid. The discussion was preliminary and acted more as a brainstorming session for Commissioners as they begin to consider possible changes to Medicaid prescription drug policy.
The October meeting devoted two sessions to Medicaid prescription drug policies. The first session gave an introduction to prescription drug cost containment strategies—including tools currently employed in the private sector—that might help state Medicaid programs constrain drug costs. The meeting wrapped up with a session describing the impact of the opioid epidemic on the Medicaid program, looking at claims data for insight on the use of prescription opioids, and reviewing state policies on substance-use treatment coverage and those designed to limit misuse of prescription opioids.
Commission Staff
Commission staff stated that Medicaid received different types of rebates for different prescription drugs, including a roughly 23 percent discount off of the Average Manufacturer Price (AMP), a “Best Price” discount when a price for a drug is cheaper than the Medicaid rebate price. Therefore, the AMP rebate is basically a rebate off of a drug’s list price, which is not often the price actually paid by wholesalers and pharmacies.
Staff also made sure to note other cost containment tools already in use by Medicaid, other than rebates, including: drug tiers, formulary restrictions, and utilization management. While Medicaid does use these tools, there are several obstacles because, for example, Medicaid has to cover any drug for which the manufacturer has agreed to the 23 percent rebate. They suggested that there is a large potential for value-based contracting; making the “add-on” rebate steeper for more dramatic price increases; uncapping the rebate limit at 100% of AMP; and incentivizing lower launch prices by allowing for a lower AMP rebate when the launch price is less than therapeutic competition.
Commission Discussion
Each Commissioner brought unique ideas and different priorities to the table. Commissioner Penny Thompson believes that it may be time for the Commission to reexamine the “basic rebate bargain,” with which Chairwoman Sara Rosenbaum agreed, noting that the Commission may want to know more about specific circumstances where they can modify the requirement where all Medicaid drugs that agree to the rebate have to be covered.
Commissioner Chuck Milligan agreed with Thomson and Rosenbaum, noting that the Commission could “revisit” this area since Medicaid is now a much larger program with many lives covered, and it may be able to get the same rebates, or even better, than the statutory amount without having to agree to cover each drug. He also noted that Medicaid Managed Care Organizations (MCOs) could garner leverage from insuring many individuals across “state and business” lines to get a better discount that Medicaid currently gets.
Commissioner Kit Gorton noted that there are great differences between Medicaid and other insurance programs – Medicaid tends to serve as a last resort for very sick and vulnerable people and that it is important to keep in mind patients with very specific needs as Medicaid participates in the broader debate about drug pricing.
Conclusion
Overall, the Commission examined several policy options to better target disproportionate share hospital (DSH) payments to providers and DSH allotments to states, laying the groundwork for future DSH recommendations to Congress.
The Commission also reviewed the Centers for Medicare and Medicaid Services’ proposed revision of regulations governing state Medicaid Fraud Control Units (MFCUs). It also considered issued which could provide the basis for comments on a forthcoming evaluation of the Money Follows the Person demonstration program, created to provide states with resources to transition people with Medicaid from institutions back to the community.