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A controversial Florida formulary law allows the state Medicaid agency to negotiate supplemental rebates from manufacturers who want their products to be included on the approved list. The agency can accept disease management or other services instead of cash rebates, and both Pfizer and Bristol-Myers Squibb have agreed to sponsor such programs.
Drugs from manufacturers with federal rebate agreements who do not agree to Florida’s terms still will be covered under Medicaid there, as required by federal law, but they will be subject to prior authorization.
State officials interviewed by staff from Health Strategies Consultancy for a Kaiser Commission on Medicaid and the Uninsured case study say there were two key factors in the state’s ability to pass a preferred drug list last year:
The case study says that in Florida, beneficiaries began to perceive that preferred drug lists and other programs that restrict access to medications are becoming unavoidable or the "lesser of evils" when compared to other cost-saving techniques such as eligibility reductions and benefit take-backs.
Pharmaceutical Research and Manufacturers of America (PhRMA), the trade group for the major drug companies, filed suit against the Florida plan, claiming that it violated federal Medicaid law. A federal magistrate denied the group’s request for a preliminary injunction, and a federal judge later allowed the state law to stand. There are reports that PhRMA will appeal that ruling.
Michigan took the Florida approach one step further in a new formulary adopted in November 2001. There, the preferred drug list is used in all state-funded prescription programs, including Medicaid.
A state-appointed panel will select a few drugs from each of 40 therapeutic categories as "best in class" (based on clinical effectiveness, safety, outcomes, and cost), and those drugs will go on the preferred list. Any drug not on the list will be subject to prior authorization. Manufacturers of drugs not on the preferred list must offer rebates in addition to the federal rebates to reduce their price to the lowest "best-in-class" price to avoid prior authorization requirements.
Brian Bruen, a research associate with the Urban Institute in Washington, DC, says that several major drug companies told state officials they would not offer any price concessions, even if it means losing market share to competitors willing to cut prices. PhRMA also filed suit against this proposal, and a preliminary injunction initially was granted and then lifted.
Kaiser’s case study on Florida says the design and execution of the program raised concerns among many beneficiary advocates, and the need has been expressed for an evaluation of the impact of the new program on beneficiary health.
Florida’s earlier attempts at pharmacy cost control apparently were crucial in terms of the legislative lobbying that led to the new program.
Kaiser says that while increased budget pressures on states may expedite passage of initiatives to achieve cost savings, states that lack experience comparable to Florida’s may be challenged to design and implement a preferred drug list in one or two years.
But if the Florida program survives the court challenges and succeeds in significant cost savings without harming beneficiaries, it could ease the political process in other states.
The case study identifies a shift in political interests in response to the new budget environment that may come to be seen in other states. "Traditionally, beneficiary advocates and the pharmaceutical industry have presented a strong, unified lobbying force against preferred drug lists and other initiatives that restrict beneficiary access to medications," the report says.
"In Florida, however, possibly foreshadowing activity in other states, HIV/AIDS and mental health groups felt forced to pursue their own exemption-forced agendas, which were separate from the broader beneficiary community. Similarly, by the end of the [legislative] session, the pharmaceutical bloc broke ranks as companies began to promote their individual interests," the report adds.
Still to be assessed is the impact of relatively little communication with beneficiaries during implementation of the new formulary. Kaiser says the absence of a strong communication channel with beneficiaries "presents a greater chance that the state will fail to gain an understanding of the experiences of the most vulnerable beneficiaries who tend to populate the state’s Medicaid fee-for-service program — individuals with chronic diseases taking multiple medications."
Also, the system relies on physicians and pharmacists to be patient advocates.
If a patient needs a fifth or higher brand-name prescription drug or a medication not on the preferred list, the system expects the pharmacist to notify the physician about the prior authorization requirement or the physician to initiate a prior authorization request. Patients also rely on physicians to present clinical evidence of a need to extend a prior authorization.
The Kaiser analysts say that while it will be challenging to conduct a comprehensive clinical evaluation of the impact of the new preferred drug list on beneficiary health, there are smaller steps that could be taken to gain some insight into how beneficiaries are affected by the program.
"An analysis of prior authorization requests and appeals claims to the agency could provide an understanding of the populations and/or disease states most affected by the policies," they say.
"Hospitalizations, lengths of stay, [emergency department] visits, and office visits for those patients who have made prior authorization requests or appeals, or whose drug regimens have been altered in the process, could also be tracked, which would be more effective than the current aggregate tracking process," the analysts explain.
"The agency could also perform in-depth investigations of any deaths that occurred within a year of a patient’s request or appeal to determine if access to medications were a contributing factor in any way."
Kaiser also suggests satisfaction surveys of physicians and pharmacists, and asking providers to document problems that arise, as well as soliciting ongoing feedback from beneficiaries through surveys and face-to-face meetings. Finally, it’s recommended that the state integrate and involve pre-existing quality assurance committees to evaluate patients’ and physicians’ experiences with the new programs.