THE SOARING COST OF DRUGS FOR THE MEDICAID PROGRAM

Last month, President Trump delayed introducing his plan to deal with the soaring costs of prescription drugs. Inspite of the delay, New York's Medicaid Drug Utilization Review Board (DURB) took it upon themselves to negotiate with drug companies. DURB voted in favor of decreasing the price its Medicaid program is willing to pay Vertex Pharmaceuticals for the company's cystic fibrosis drug.

The federal government's aversion to lower drug prices for the Medicaid program is the main driver of rising costs. Private health insurance companies can make their own formularies and negotiate pricing. Medicaid has much more negotiating power because of its massive membership, but by rule, is limited from doing the same.

The Centers for Medicare & Medicaid Services (CMS) is projecting that prescription drug spending will be the fastest growing category of health spending over the next decade. CMS is well aware of the situation and according to the head of CMS, Seema Verma, "the bottom line is that insurance premiums have skyrocketed and there's a number of people that just can't afford to pay."

Pharmacy Benefits Consultants investigated wholesale drug prices from the beginning of 2017 to 2018 and found that "twenty prescription drugs saw their prices rise by more than 200%." Additionally, The Senate Homeland Security and Governmental Affairs Committee Minority (HSGAC) carried out a review and found that "prices for each of the 20 most-prescribed brand-name drugs for seniors have increased dramatically every year for the past five years." That rate is "approximately ten times higher than the average annual rate of inflation." Moreover, from 2012 to 2017, "twelve out of the 20 most commonly prescribed brand-name drugs for seniors had their prices increased by over 50 percent."

The Trump administration, CMS, and other government authorities are aggressively evaluating the situation and trying to find a remedy. One approach is proposed in Trump's 2019 budget plan. The recommendation is to put into place a pilot program that would permit state Medicaid programs to test drug formularies that would promote more competitive drug pricing.

MASSACHUSETTS MEDICAID: THE MEDICAL HUB AND HEALTHCARE LEADER

Medicaid's lack of ability to negotiate with drug companies is one factor leading to soaring drug prices. In Massachusetts alone, drug prices have doubled in the last 5 years. MassHealth's drug spending is extending the state's spending plan as drug costs have increased to over $2 billion a year. In response to the climbing costs, Massachusetts's Governor, Charlie Baker, has sent a waiver to the Trump administration to develop a selective drug formulary that would allow the state to negotiate pricing and remove ineffective medications. State officials are certain that by minimizing the quantity of drugs in the formulary and by limiting the amount of drug manufacturing companies who provide them, it will establish the negotiating power needed to decrease costs.

While health-care policy specialists and CMS back the plan, the state's proposition to eliminate drugs from the formulary could be problematic. Consumer groups assert that the people benefiting from the program may need a number of drugs for their conditions. Depending on what drugs administrators deem ineffective, patients could potentially lose access to needed care. Critics of the proposal suggest that it does nothing to deal with drug costs and it will in fact hurt people that rely on the program. In fact, there is a high possibility that drug companies will raise drug prices as their competition decreases.

Assuming the governor's plan is approved, MassHealth will need to develop an appeal process for doctors to prescribe drugs not present on the formulary so patients can access the medications they need. If states thinking about this model can show that patient's access to needed drugs is intact and their programs can save money, it may be a remedy to rising drug prices across the nation. At the moment, the president's 2019 budget would allow five states to try what Massachusetts is proposing.

NEW YORK'S SOLUTION TO AFFORDABLE MEDICAID DRUG PRICES

New York representatives also see the significance of having the option to negotiate drug prices. In an effort to deal with increasing drug costs, New York's state Medicaid program's DURB voted to enact a law that uses supplemental rebates to manage drug costs. The law focuses on drugs that are "priced disproportionately to their therapeutic benefits." When the state experiences a drug spending surge of 2.4% to 15.1%, DURB can ask for discounts to a more reasonable price.

The first test will be carried out with Vertex Pharmaceutical's cystic fibrosis drug, Orkambi. In the past, the drug cost $250,000 a year for patients, the proposed cost has been reduced to $83,000. That equates to a 67% discount.

On a global scale, pharmaceutical manufacturers seldom, if ever, consider demands for discounts. These companies believe that competition is the solution to regulating drug pricing. They argue that drugs like Orkambi have no competitors and that $250,000 yearly is reasonable. They also assert that high prices support their capacity to research and create new drugs. This claim does not ring true considering that nine out of the ten largest pharmaceutical manufacturers spend more on marketing than on developing new drugs.

Drug prices continuously rise and it is putting patients access to care in jeopardy. Consequently, government officials are making efforts to lower the costs and achieve fair prices. Ultimately, the existing reality of hyper-inflated drug prices cannot be maintained, not only for public programs like Medicaid and Medicare but for everyone.

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