Climbing drug costs squeeze state Medicaid programs

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As drug prices continue to rise, state Medicaid programs may be forced to compensate by enacting policies that limit medications or by cutting health plan reimbursement.

Spending on prescription drugs has risen in recent years, in part due to skyrocketing costs for treatments like EpiPens or new drugs used to treat hepatitis C, among others. The Affordable Care Act has also spurred an increase in the number of prescriptions patients fill--particularly for newly eligible Medicaid members.

“We’re pretty close to states hitting their breaking point,” Trish Riley, executive director at the National Academy for State Health Policy, told The Hill.

Because states aren’t often able to correct reimbursement rates mid-year if a drug price rises significantly, the resulting pressure on state Medicaid programs could result in payment rate cuts, added Edwin Park, vice president for health policy at the Center for Budget Policy and Priorities. Or in the worst case, Riley said, a state could end its Medicaid drug program.

While states can use preferred drug lists, comparative effectiveness reviews, prior authorization and manufacturer rebate mandates to control drug costs, those efforts might not be enough if price trends persist, according to the article.

For its part, Medicaid Health Plans of America, a Medicaid managed care advocacy group, wants to loosen restrictions on how much they are able to negotiate prices with drug companies. Prior authorization, on the other hand, isn’t applicable to drugs like EpiPens, Jeff Myers, the group's CEO, points out to The Hill. In that case, plans simply must wait for an alternative to bring down the price.

Medicaid and Medicare Part D spent more than $1.2 billion on EpiPens between 2011 and 2015, the Centers for Medicare & Medicaid Services recently said. This week, EpiPen maker Mylan agreed to pay $465 million in a settlement with the Justice Department over the misclassification of the drug under the Medicaid Drug Rebate Program.