Opinion Piece

RX Bill Will Cut Medicaid Costs, Preserve Patient Access

Albuquerque Journal
February 28, 2002
By Sen. Dede Feldman

The $50 million hole in the state’s Medicaid budget was center stage during the recent legislative session with anxious health care consumers, providers and taxpayers crowding committee rooms. They were all nervous that a solution would come at their expense—in the form of decreased benefits, eligibility cuts, or slashed reimbursement rates.

One solution, suggested by the legislature’s interim Health and Human Services Committee, would come at the expense of none of these—and save $1.5 million in the fee-for-service Medicaid budget, according to the state Human Services Department. The solution is embodied in Senate Bill 253, which now awaits action from the Governor.

The Governor should sign the bill, and become a champion, as have Republican Governors John Engler (Michigan) and Jeb Bush (Florida) for similar programs in their states.

Here’s what Senate Bill 253 does:

It sets up a preferred prescription drug list composed of drugs from whose manufacturers the Human Services Department is able to negotiate a supplemental discount in addition to what is now available to the Medicaid fee-for-service program. If the manufacturer does not negotiate (it is a voluntary program), its drug is not included on the preferred list and, in order to receive that drug, patients must obtain prior authorization from medical personnel.

Prior authorization is commonly used by HMOs, which currently negotiate a better discount for their Salud (Medicaid) patients than the state gets for patients not on the Salud program. Access of Medicaid beneficiaries to needed, but non-formulary, drugs is protected by federal law which guarantees access to medically necessary drugs and provides for a 72 hour emergency supply. All FDA approved therapies will be available to patients—contrary to what the pharmaceutical industry is now telling New Mexico Seniors through a deceptive phone bank—and prescribers (i.e. doctors) maintain control in directing patient care.
The measure speaks directly to a key cause of the rapid increase in Medicaid spending—the high costs of state-funded prescription drugs.

Nationwide, according to the Kaiser Family Foundation, Medicaid dug costs grew almost 18% from 1997 to 2000, about double the overall growth in Medicaid spending. In New Mexico, fee-for-service drug costs are projected at $36.7 million this year, a 12.7% increase over FY 01. And they will continue to grow.

Testimony from both seniors and health care experts before the Human Services Committee during the fall made it clear that drug manufacturers sell the exact same drug to different purchasers at different prices-- with seniors and the uninsured paying the highest retail price. Medicaid programs pay less, taking advantage of a federal law that mandates a "Medicaid Best Price." But, as we soon found out, the Medicaid "Best" price is far from the cheapest price. Other states, also under financial stress, are already getting better discounts like those utilized by hospitals and rural clinics—not by setting the price, but simply by negotiating better deals with the companies under legislation like SB 253.

Florida recently enacted a preferred drug list based on supplemental discounts from pharmaceutical companies. George Kitchens, bureau chief of Florida’s Medicaid Pharmacy Services, estimates a total savings of $127 million since the program began last year. Gov. Jeb Bush says the program "will save our taxpayers $214 million this year while preserving patients access to the medication they need." In Michigan a similar program that covers Medicaid recipients as well as other state programs, is expected to save $42 million and perhaps more according to budget estimates. Signed and supported by Republican Governor John Engler, the Michigan program, like Florida’s, has withstood legal challenge.

Other states, including Maine, Oregon and Vermont have taken different approaches to controlling prescription drug costs. Some are expanding existing Medicaid discounts to non-Medicaid populations. Others are thinking about subsidizing trips to other countries where seniors can buy their medications at one-fourth the cost. Three weeks ago the Washington Senate passed SB6368 creating a list of preferred drugs which the state can use to negotiate lower prices from drug manufacturers. The bill is quite similar to SB 253, which passed the New Mexico Senate unanimously.

At every turn, the pharmaceutical companies and their allies have argued that any attempt to control escalating government expenditures for prescription drugs-- either through negotiation, use of rebates, or bulk purchasing—is tantamount to price control, and it will harm research and development. They have filled the corridors of every state capitol with lobbyists bearing tote bags, CDs, slick brochures and invitations to seminars held in posh resorts. They have alarmed senior citizens and people with mental illness by misrepresenting this bill and others like it as an attempt to cut off needed medications. Their trade association, the Pharmaceutical Research and Manufacturers of America (PhRMA) has sued every state in the union that has tried to take action. But they have not been successful.

Senate Bill 253 is supported by a large, bipartisan coalition of seniors and others including the AARP, the NM Primary Care Association, Health Action New Mexico, the Senior Citizens Law Office, and the New Mexico Pharmaceutical Association, which represents local pharmacists.

In Senate Bill 253, Gov. Johnson has a great opportunity show he is serious about cutting Medicaid costs responsibly—by refusing to hold huge pharmaceutical companies harmless while asking hard-pressed local pharmacists, health care providers and the poorest citizens of our state to make the sacrifice.
Call Governor Johnson at 1-505-827-3000, or fax him at 1-505-827-3026 today and ask him to sign Senate Bill 253.

Senator Dede Feldman (D-Bernalillo Co.) is co-chair of the Health and Human Services Committee and Chair of the Senate Public Affairs Committee.