A provision in the 2010 health care law which permits states to receive drug rebates on drugs for Medicaid prescriptions was not a very well known fact and now has states hurrying to take advantage of the hefty savings.
The federal government wants states to fix dispensing costs for drugs distributed through Medicaid. New York has brought down Medicaid spending and Alabama - where cost of drugs is very high is creating a commission to distribute drugs at an economic rate.
"It's clearly been a trend over the last several years," said Andrea Maresca, director of federal policy and strategy at the National Association of Medicaid Directors. "I think there's money to be saved."
The federal health care program for low income Americans has tried various methods to keep costs down - prior authorization of drugs, discounts from manufacturers and joint buying programs.
Pharmaceutical manufacturers and pharmacy managers are promoting the use of certain drugs which carry incentives and rebates. People are spending more on chronic ailments like heart disease or diabetes.
The ACA allowed states to expand their Medicaid programs to cover more people. Some of the nation's most populous states, such as California and New York, have expanded, while others, such as Texas, have not. Expansion can provide a windfall to any drug provider in Medicaid.
"Medicaid expansion puts a premium on this," said Mark Merritt, CEO of the Pharmaceutical Care Management Association.
"For a long time, the evidence has been that the states have been very generous to the pharmacies," said Adam Fein, founder of Pembroke Consulting, a management advisory and business research firm. By changing the system states pay less to pharmacies although the saving for generic drugs is not much.
Now pharmacies will inform the federal government of their spending on medications and the government will pay them along with a dispensing fee. "Managed care could be better or worse," Fein said. Medicare uses managed care, and there are proven methods to save costs, such as systems that steer patients to less-expensive medications, preferred pharmacies and mailed-medication programs. "Some are working better than others, but it's buyer-beware, just like anything else."
Managed care is just one option, Maresca said. "Some states just don't have the market," she said. "Rural states may not see it as feasible."
As federal funds are available for coordinated care, it may become feasible at a local level, she said, such as within a hospital or for a specific population of patients.
"There's a recognition that the states need to be a bit more sophisticated to deliver managed care," she said.
States were worried they would lose federal rebates for medications and thus be unable to bargain for lower prices by moving to managed care.
Alabama has created a commission to look for ways to save in the Medicaid pharmacy program.
"We're nothing close to that," Don Williamson, Alabama's state health officer, said of New York's $400 million in savings. "Our program is only $600 million total."
But Alabama still needs to save money, Williamson said, because "our Medicaid demand exceeds our resources."
"For us, it's going to be an interesting balancing act," he said.
Kelly Kennedy, August 2013
Hannah Punitha (IRDA Licence Number: 2710062)