Hard numbers lacking in Medicaid pharmacy reform effort
by Tim Lockette
Oct 10, 2013 | 4269 views |  0 comments | 62 62 recommendations | email to a friend | print
MONTGOMERY — During the next two months, a state commission will look at three models for reforming the way the Alabama Medicaid Agency dispenses drugs to people in poverty.

But it’s still too early to say which approach, if any, would actually save the state money.

"We're trying to put together a puzzle without the picture on the top of the box, and without all the pieces," said Rep. Jim McClendon, R-Springville, a member of the Alabama Medicaid Pharmacy Study Commission.

Gov. Robert Bentley appointed the 16-member commission in June and charged it with studying ways to reform the delivery of drug benefits under Medicaid, the state-and-federal health care program that covers people below the poverty line.

The state's costs for Medicaid as a whole have skyrocketed in recent years, growing to $615 million this year, compared to about half that prior to the 2008 recession. Much of the increase is due to a post-recession influx of new Medicaid clients.

The state’s $1.7 billion General Fund budget hasn't grown to keep up with that increase, and the state's portion of Medicaid is now the single largest expense in the General Fund. A reform bill passed earlier this year will reorganize medical care in the agency, putting the program under five regional management organizations, each with a mandate to bring down cost. State officials expect the change to slow, but not stop, the growth in the program's cost.

That reform didn’t change anything about how the Medicaid Agency dispenses medicines, though. The Pharmacy Study Commission met today to look at how Alabama's pharmacy program compares to other states in terms of keeping costs low. The plan was to find a state with low-cost, high-quality care that Alabama could emulate. But the results weren't conclusive.

"I've never seen a data set this hard to work with," said Don Williamson, the state health officer and chairman of the commission.

Williamson said there's no nationwide repository of information on the state costs of Medicaid — at least, not one that offers an apples-to-apples comparison of per-patient costs in different systems. Medicaid officials announced in August that the state paid $593 for drugs for the average Medicaid patient in 2012. Williamson said state officials couldn't arrive at an accurate assessment of the per-patient cost in the other 49 states.

Still, there is data to show how much each state pays for each pill purchased under Medicaid. Alabama pays an average of $1.02 per pill, below the nationwide average of $1.10 per pill, Medicaid officials said.

In Alabama, Williamson said, a penny decrease in the average pill price would save the state about $5 million per year.

Of Alabama's neighbors, Georgia pays the least per pill — about 88 cents. Williamson noted that 85 percent of Georgia's drugs are dispensed through managed care plans. Alabama's Medicaid drug benefits are on a fee-for-service basis, with the state paying an agreed-upon fee for drugs when patients are prescribed them. Williamson said the managed care option is one Alabama might consider.

Georgia also has "Most Favored Nation" status — essentially, a law that requires drug companies to sell drugs to Medicaid at the lowest price charged to any customer. (No one on the commission seemed to know the origin of the name. "Most Favored Nation" is also a status that nations bestow on each other to improve international trade.)

Alabama's approach is more complex than Georgia’s, with the state hiring a private company to determine the average price for a drug, and setting that as Medicaid's cost for the drug.

Williamson said that in the commission's next meeting, members will consider three proposals for reforming delivery of drugs through Medicaid. One would put the program in the hands of a pharmacy benefit manager, or PBM, a private company that would negotiate prices directly with drug manufacturers.

The state's pharmacists, Williamson said, are also interested in collaborating to create a PBM-like entity within the state, Williamson said. He said the state would also look at a preferred-provider approach, in which Medicaid would contract with one drug provider to sell drugs at a reduced cost.

There are no projections, as yet, on which approach would cost the least, Williamson said. Those projections will be available at coming meetings, he said.

The state has already made a number of smaller changes to Medicaid in an attempt to trim the program's costs. In June, the co-pay on prescriptions went up from $3 to $3.90. Last week, with the beginning of the fiscal year, the agency stopped paying for drugs that can be bought over the counter. The changes are expected to trim a few million off the $115 million per year the agency spends on pharmaceuticals.

The commission is expected to complete its work Dec. 1. Any recommendations would require approval of the Legislature, which convenes Jan. 14.

Capitol & statewide correspondent Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

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