Government

Medicaid panel eyes restrictions on drugs physicians prescribe

The federal effort to pare prescription drug costs could increase the hassle factor and send more patients to overburdened clinics.

By David Glendinning — Posted Sept. 12, 2005

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Washington -- Lawmakers set on reducing Medicaid spending should take a long, hard look at how the program pays for its drugs, according to a federal advisory commission. But some physicians worry where this look might lead policy-makers.

The panel, which the Dept. of Health and Human Services convened in July, approved a set of recommendations for a September report that outlines about $11 billion in Medicaid reductions over the next five years. The report next goes to Congress, which has pledged to find at least $10 billion in entitlement savings.

The cost of medications will be a prime target if lawmakers choose to follow the commission's strategy. Borrowing from proposals by the Bush administration and the National Governors Assn., the group said the federal government can squeeze billions out of the system by steering beneficiaries toward less expensive medicines and by maximizing the savings available from drug firms.

Federal endorsement of a tiered co-payment option would allow states to increase the amount Medicaid patients would have to pay for a non-preferred drug, saving the government roughly $2 billion over the next half-decade, officials said.

More than $6 billion that otherwise would subsidize drugs would stay in federal coffers if states and Medicaid managed care plans were permitted greater access to drug companies' discounts and rebates, the commission agreed. The greatest single chunk of the five-year savings, $4.3 billion, would come from letting states negotiate drug purchases at the average manufacturer price, which is lower than the average wholesale price.

A call for a migration away from more costly medications is an acknowledgement that drug prices are eating up an ever-growing piece of Medicaid, said family physician John Rugge, MD, one of 15 nonvoting members on the 28-person commission.

"This is really a matter of directing both physicians and patients together toward more cost-effective medicine," he said.

The move would force changes in some physicians' prescribing habits, said Georges C. Benjamin, MD, the American Public Health Assn.'s executive director. Doctors might feel the pressure or obligation to find appropriate drugs that are not going to hit patients too hard in the pocketbook, he said.

Added burden for doctors?

But physicians can take these strategies only so far before clinical considerations start bumping up against the new limitations on doctors' ability to prescribe freely, said Dr. Benjamin, whose association opposes any Medicaid cuts. The public health community fears that cash-strapped beneficiaries would be unable to afford the higher-cost drugs even when they are the best option, forcing them to change to less-effective therapies or go without the treatments altogether.

"This whole concept that this will change patient behavior only works when you have a commodity that's discretionary," Dr. Benjamin said. "And for this population, it's not discretionary."

At the very least, physicians would encounter the hassle factor of repeated calls to Medicaid offices to see which of the appropriate drugs are on the preferred list, a process that undoubtedly would raise practice costs, Dr. Rugge said. In the worst-case scenario, patients driven out of treatment plans by cost pressures would flood already overburdened emergency departments and clinics.

"Restructuring Medicaid can mean restructuring medical practices," said Dr. Rugge, who runs a network of community health centers in New York State. "If it's done poorly, it can mean the destruction of some practices."

Dr. Benjamin, a former internist who at one time headed up Maryland's state health department, said any cost savings that the federal government and states derive from limiting drugs would prove illusory.

"Even if the best decisions are made under the worst circumstances, and a person has a bad clinical outcome as a result of that, it's certainly going to be more costly to the system," he said.

Focus on patients

The outlook for short-term Medicaid reform is not all ominous.

"Physicians are going to feel the whiz of the bullets going by this time around," Dr. Rugge said. "They're not going to feel the molten lead."

For example, the commission recommended the changes to drug price negotiations with manufacturers and advised Congress to close loopholes that allow states to artificially bump up their federal matching payments for use on non-health budget items.

Also, Carol Berkowitz, MD, president of the American Academy of Pediatrics and one of the nonvoting commissioners, successfully urged the panel to highlight language in the tiered co-payment recommendation that gives states the flexibility to waive beneficiary cost-sharing in situations of true hardship or when a non-preferred drug would result in adverse health conditions.

For doctors who might not consider the September recommendations life-changing, the real challenge will be ensuring that they aren't burned by long-term reforms, Dr. Rugge said.

And as the group prepared to transition to discussing long-term Medicaid reform recommendations for its December 2006 report, Commissioner and American Medical Association Immediate Past President John C. Nelson, MD, MPH, issued a call for the panel's top consideration to be the protection of patients.

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ADDITIONAL INFORMATION

Snipping away at Medicaid funding

Recommendation Estimated savings
Allow states to negotiate additional discounts from drugmakers for covered medications. $4.3 billion
Give Medicaid managed care plans access to rebates. $2.0 billion
Permit states to implement tiered co-payments that charge beneficiaries more for non-preferred drugs. $2.0 billion
Restrict applicants' ability to transfer assets to achieve Medicaid eligibility. $1.5 billion
Prohibit states from taxing Medicaid managed care organizations to boost federal matching funds. $1.2 billion
Total $11.0 billion

Source: Congressional Budget Office, CMS Office of the Actuary

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