4 Ways Medicaid Could Manage High-Price Drugs

How State Medicaid Programs are Managing Prescription Drug Costs: Results  from a State Medicaid Pharmacy Survey for State Fiscal Years 2019 and 2020  | KFF

Source: Fierce Healthcare, by Frank Diamond

Private payers can just say “no.” So can Medicare. Medicaid, however, must say “yes.”

Medicaid must provide coverage for any medication approved by the Food and Drug Administration (FDA), even those medications approved under the FDA’s accelerated approval program (AAP), which are often very expensive medications that lack complete clinical data, according to a special commentary in JAMA Health Forum.

For the most part, the authors said, suggestions for addressing the problem focus on the FDA approval process. Policymakers might also want to consider better reimbursement systems for payers when it comes to medications that secure accelerated approval, the article said.

The accelerated approval program was created in 1992 to speed up the approval process for medications to fight HIV/AIDS. However, over the past decade, the AAP has shifted more into oncological medications and other niche areas. States worry that their Medicaid programs might be crushed by the high prices of some drugs.

Take Alzheimer’s disease drug aducanumab. Approved under the AAP, aducanumab came to market with a $56,000 annual price tag and serious questions about its efficacy.

Private insurers can exclude drugs from their formularies, and many did just that for aducanumab.

“Medicare has the authority to limit coverage for drugs that are not reasonable and necessary, a rarely used power it applied regarding aducanumab due to the lack of reported clinical benefits when weighed against the potential for harm,” the article said. “But state Medicaid programs lack these authorities and are generally legally required to cover essentially all FDA-approved drugs, including accelerated approval products, despite their lack of supporting clinical evidence.”

The authors of the JAMA Open Forum article suggest four possible ways to fix this problem: formulary exclusions, Medicaid rebate reform, value-based pricing and consolidated purchasing.

Formulary exclusions

Give Medicaid the power to exclude AAP drugs from its formulary on the grounds that they have not been proven to have medical efficacy, the authors said. That could be done through waivers, something that Massachusetts and Oregon have already applied for.

The Centers for Medicare & Medicaid Services (CMS) already rejected Massachusetts’ request, although legal scholars argue against CMS’ reasoning.

The government could create a national process to determine whether Medicaid must cover certain drugs or allow Medicaid to simply mirror Medicare’s determinations, the authors wrote. But Medicare and Medicaid aren’t interchangeable, and the authors note that “although enabling state Medicaid programs to adopt Medicare’s coverage determinations would be useful for a product like aducanumab, it would be less useful for products with high Medicaid market share but little Medicare exposure, such as eteplirsen or hydroxyprogesterone caproate.”

Medicaid rebate reform

The Medicaid and CHIP Payment and Access Commission (MACPAC) proposes that drugs approved under the AAP be sold at an increased rebate that would decrease only with greater evidence of efficacy. MACPAC also proposes that the prices account for inflation.

“The MACPAC proposal would likely require legislation, and its effectiveness depends on the size of the increase in the rebates; however, this proposal is likely less administratively complex than other strategies because it builds on an existing rebate structure,” the article said. “The proposal targets products that have not yet converted to traditional approval and could encourage the timely completion of confirmatory trials.”

Also, as Fierce Healthcare reported recently, expect pushback from drug companies.

Value-based pricing

This involves a review of the clinical data on medications and tying the price to what it seems to be worth at certain points along that review. It would involve comparing the AAP medication with other drugs used to treat the same conditions to help determine whether the newer drug is worth the price.

“These approaches are used by many other countries to ascertain appropriate pricing for new drugs, and they permit payers to balance the prices that are paid while clinical evidence develops,” the study said.

Consolidated purchasing or carve-outs

The authors suggested examining the possibility of creating a federal insurance program for cell and gene therapies for rare diseases.

“The goal would be to shift the financing of these medications to the federal government by increasing the federal share of Medicaid spending to 100% either for all accelerated approval products or rare disease products alone,” the article said. “Under some of these proposals, access could be managed through a rare disease fund for all patients regardless of payer type.”

Each of these four suggestions comes with challenges and drawbacks, but all could possibly be a solution for states trying to deal with ever more expensive medications that they now must currently cover, the authors said.

“The types of proposals that we have described could provide a range of options for policymakers to evaluate trade-offs of access and pricing associated with the accelerated approval program,” the article said.

Last Updated 11/30/2022

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