Judge stays Medicaid discount drug program

Michigan now joining with other states

In a move that will encourage such programs across the nation, a federal judge has ruled in favor of a Medicaid program that uses preferred drug lists and prior authorization.

The Pharmaceutical Research and Manufacturers Association (PhRMA) in Washington, DC, and patient advocacy organizations such as the National Alliance for the Mentally Ill of Michigan, filed the lawsuit in the U.S. District Court for the District of Columbia. The case asked the federal court to issue a preliminary injunction invalidating a program approved by the secretary of Health and Human Services and implemented by the state of Michigan.

The program restricts Medicaid beneficiaries’ access to prescription drugs unless the manufacturer pays the state additional rebates beyond those required by the Medicaid program. If doctors want to use a drug that is not on the list, they must first get state permission. The lawsuit also asked the court to prohibit the Secretary from approving other states’ programs that share some or all of the characteristics of the Michigan program.

U.S. District Judge John Bates dismissed the lawsuit in late March, saying the states had "broad room" to establish prior-authorization prescription drug programs. The judge also said the drug manufacturers failed to show that the state acted illegally when it asked the companies for lower rates to get on the list.

Michigan currently spends more than $1 billion a year on pharmaceutical costs for its 1.4 million Medicaid and other low-income program participants. The state says its Pharmaceutical Best Practices Initiative, which has been in place since February 2002, saves Michigan approximately $850,000 a week.

PhRMA says it plans to appeal, contending that programs such as Michigan’s could harm patients by limiting or denying access to medicine for the state’s most vulnerable patients, the group says.

In the meantime, Michigan plans to extend its program. Michigan Gov. Jennifer Granholm recently announced that the state would collaborate with Vermont and South Carolina to implement the nation’s first multi-state purchasing arrangement for pharmaceuticals purchased under their respective Medicaid programs. The joint venture would use the same structure as the Michigan program.