Alarmed by rising prescription drug prices, Massachusetts officials are seeking permission from the federal government to limit the number of medicines that would be covered by the state Medicaid program — known as MassHealth — which is currently required to provide coverage for all treatments.
In making their request, state officials argue they should be able to use some of the same tools that commercial insurers employ to contain costs. And they insist such a move is needed in order to preserve the larger mission of providing adequate health coverage.
“Since 2010, MassHealth drug spending has risen at a compound annual growth rate of 13 percent. If growth in drug costs continues at the current trajectory, it may crowd out important spending on health care and other critical programs,’’ Marylou Sudders, Massachusetts secretary of Health and Human Services, wrote in a Sept. 8 letter to the US Centers for Medicare & Medicaid Services. MassHealth is the state’s Medicaid program.
The proposal for lowering drug costs was part of a larger waiver request for MassHealth programs that was first released two months ago for public comment. But the formal submission to CMS was not made until earlier this month.
The move comes amid intensifying concern across the country over prescription drug prices. But even though polls show Americans want the federal government to take action, Congress has failed to act. As a result, states are filling the void. The National Governors Association plans a strategy session this fall, and more states are passing or considering bills to force drug makers to explain price hikes.
Massachusetts officials, however, are taking a different — and controversial — approach. They want CMS to eliminate a longstanding requirement for Medicaid programs to cover any drug and allow MassHealth to adopt what is known in the insurance world as a closed formulary. This allows an insurer to provide coverage for only certain drugs that are made available on favorable terms.
By using “commercial-style’’ formularies, state officials argue, MassHealth would have more leverage to extract additional rebates from drug makers, which the companies pay to insurers in exchange for favorable coverage. And the officials proposed Medicaid formularies that offer at least one drug for treating an ailment, which could guarantee volume sales to drug makers in exchange for larger rebates.
“At present, MassHealth has limited ability to offer such volume deals to manufacturers, given the requirement to cover all drugs in the Medicaid rebate program,’’ the waiver stated.
Whether the waiver will be granted is uncertain.
“This is the first real concrete and plausible request made (by a state) to CMS on this issue,’’ said Matt Salo, executive director of the National Association of Medicaid Directors. “At the end of the day, this is all about the ability of any state Medicaid program to get lower prices on drugs.’’
Already, though, there is opposition from various quarters, including drug makers and consumer advocates that argue such an approach would rob patients of needed alternatives.
In comments submitted shortly after the proposal was released this summer, Health Care For All argued that a closed formulary could “create access barriers.’’ PhRMA, the pharmaceutical industry trade group, suggested such a move would jeopardize the “most vulnerable’’ patients.
“The reason you have multiple drugs for an illness is because some drugs don’t work for everybody,’’ said Ira Loss of Washington Analysis, who tracks regulatory policies for investors. “This could leave people out in the cold.’’
A CMS spokesman declined to comment.
The state, however, pointed to a recent decision by the CVS pharmacy benefit manager to exclude 35 drugs from its formulary, either because a less costly but equivalent drug had become available or some drugs had dramatically gone up in price “without clear justification,’’ according to the waiver. The state also noted Medicare Part D commercial plans have closed formularies.
MassHealth “should have the same flexibility,’’ state officials wrote to CMS.
The state also wants permission to exclude from its formulary drugs with limited or inadequate evidence of clinical efficacy. To bolster its argument, state officials noted the Food and Drug Administration is approving more new drugs through an accelerated approval program, but not all drugs have demonstrated a clinical benefit or used a surrogate marker, or threshold, to do so.
Instead, the state would work with the University of Massachusetts Medical School to develop its own “rigorous review process’’ to set coverage for new drugs and guarantee these are clinically proven and effective. A drug might be excluded if it does not have an “incremental’’ benefit compared with alternatives or clinical trial goals were not achieved, among other things.
“Through this process, the state could avoid exorbitant spending on high-cost drugs that are not medically necessary,’’ the state argued. “Unfortunately, current rules do not allow Medicaid programs to exercise discretion about whether these drugs should be covered without being fully clinically proven.’’
Meanwhile, Salo, of the National Association of Medicaid Directors, sounded optimistic, noting that CMS chief Seema Verma has previously suggested that companies submit waivers for transforming Medicaid.
“The messaging that we have heard at CMS is that this administration wants to be as state-friendly as possible,’’ he said. “Does that mean they will approve this? I don’t know, but if anyone will, it would be these folks.’’
However, he acknowledged that legal challenges can be expected if CMS does grant the waiver.
Ed Silverman can be reached at ed.silverman@statnews.com. Follow him on Twitter @Pharmalot. Follow Stat on Twitter @statnews.
