Supreme Court to weigh Maine drug-discount plan
Manufacturers question price breaks
State health policy experts and pharmaceutical company officials are anxiously awaiting the U.S. Supreme Court’s decision on a controversial Maine program designed to help residents unable to afford prescription drug coverage get lower-cost medications.
Known as Maine Rx, the state program requires pharmaceutical companies to provide the same discount to residents who do not have health insurance or drug coverage as they do to members of group health plans. Companies that do not agree to participate in the program will not have their products listed on the state’s preferred drug list for Medicaid recipients.
Supporters of the program say it will help more than 300,000 people who currently don’t have prescription drug coverage and, they argue, the state is simply doing what other countries have done for all of their citizens — using their large buying power to force drug companies to bargain.
Critics claim the program violates federal Medicaid regulations by altering the benefits Medicaid recipients receive to benefit people outside the program. The program also violates federal interstate commerce and antitrust laws, they argue.
If the Maine Rx prevails in court, others states are expected to unveil similar programs nationwide, experts say.
At heart of the debate, are the financial challenges faced by states struggling to control Medicaid spending and the rapidly escalating prescription drug costs, says Michael Sparer, PhD, assistant professor of health policy at the Mailman School of Public Health at Columbia University in New York City.
"Generally, all states are in a pickle right now," he explains. "Drug costs are escalating dramatically, and so is utilization. And Medicaid costs are rising at the same time many states are facing balanced-budget problems. They have two, sometimes conflicting, priorities: reduce Medicaid drug spending and provide prescription drug help to people ineligible for Medicaid but who can’t afford private drug coverage."
States tinker with system
Maine’s effort is just one of many strategies states are using to try to get pharmaceutical companies to bear some of the cost of treating the poor and frail with newer and increasingly expensive drugs, Sparer adds.
First in an effort to control escalating Medicaid drug costs, they have implemented "preferred drug lists," lists of medications that the state plan prefers that physicians use. Because it is illegal for Medicaid plans to restrict use of a drug or treatment based on cost considerations, they are not allowed to have drug formularies. However, the courts have ruled that preferred drug lists are permissible.
"States cannot deny coverage of a particular medication," he explains. "What they can say is that, These are the drugs we’d like for you to use. If you want another drug, call this 800 number and, if you convince us it’s necessary, we’ll pay for it.’"
Pharmaceutical companies have argued that such arrangements are the same as formularies, because physicians will not go through the extra hassle of calling the Medicaid administrator, but will just adhere to the preferred list.
"Studies in the states that have implemented such plans have shown that utilization of drugs not on the preferred list is significantly decreased," he notes. "But the courts have held that, as long as the state does not prohibit a person from receiving another drug, the preferred list is acceptable."
In order to have their drugs covered by Medicaid, federal regulations require the companies to discount the regular price by 15%, Sparer says. In addition, some states such as Michigan and Florida, have required the companies to cough up an additional 10% off the price to be on the preferred drug lists.
"Florida has gone to the additional step of requiring companies to reduce their price by 10% or develop a disease management program with their drugs that will save an equivalent amount of money and provide more of a benefit to participants," Sparer adds. "I think some of the companies have been developing these disease management protocols there to avoid paying the rebate and accomplish some other case management goals."
Maine now wants to use similar leverage to get better prices for non-Medicaid recipients — a move pharmaceutical companies claim is wrong because, unlike the other strategies, it uses Medicaid patients as pawns in a scheme that is not designed to benefit them.
"The key question in the Maine case has been what do Medicaid beneficiaries get out of this?" he adds. "The pharmaceutical companies are arguing that it is zilch — their purchasing power is being used to leverage benefits for other people. So they could be harmed, in terms of impeded access to certain drugs, but they get no benefit."
Medicare gap part of problem
Essentially, states are caught between a rock and a hard place in terms of helping needy people who are not eligible for Medicaid but can’t afford prescription drug coverage, he relates.
"Historically, states have felt this should be a federal responsibility and Medicare should cover it, but there are problems there, obviously," he says. "About a year ago, 28 states took state dollars and used that money to provide assistance to people without drugs to make drugs more affordable. These people didn’t get Medicaid coverage but they got help with prescription drugs."
Now, cash-strapped states need someone — the pharmaceutical companies or the federal government — to share the burden.
Most of the costs of these types of programs are absorbed by people on or eligible for Medicare who do not have drug coverage, and most states will agree that these measures are just sorts of stopgap, temporary efforts in the hopes that Medicare will begin offering prescription drug coverage, Sparer says.
"The bottom line is, states are trying to figure out a way to provide drug coverage to those who lack coverage without footing the whole bill themselves," he relates. "If you are a state health policy director and your governor says, We are looking at a $1 million budget deficit, and you need to figure out how to save some money,’ but he is also telling you that he has some elderly and low-income folks who don’t have drug coverage but are needy and he wants to help them, what do you do?"
Plan may backfire
Before more states decide to jump on Maine’s bandwagon, it may be worth examining some possible effects of this type of program, first, notes James F. Blumstein, PhD, professor of law and director of the Health Policy Center at Vanderbilt University’s Institute for Public Policy Studies in Nashville, TN.
"It intuitively sounds good that government or other purchasers with power would bargain down sellers and that might make sense, but it depends on market conditions," he explains.
For example, if the state’s percentage of the national pharmaceutical market were so significant that it dropped prices there significantly lower than market value, the companies might not be as quick to supply the state.
"You might not be just reducing the price, but also the availability of some pharmaceuticals," he notes. "Why would a company that is producing to capacity allocate its product to Maine rather than some other state if they could get higher prices elsewhere?"
Pharmaceutical companies might decide to not keep a warehouse in the state and ship all orders from outside. And they may decide to accept only orders from that state in sufficient enough quantities to make it cost-effective to ship in.
"Hospitals and pharmacies may end up having to order in quantities of 1,000 pills instead of 100," he explains.
However, Blumstein doubts that Maine carries such a significant amount of the market that its actions will significantly affect pricing.
"Ultimately, pharmaceutical manufacturers sell on a national scale, and I am not at all persuaded that Maine is really the market for the sale of pharmaceuticals." If, however, other states were to enact similar programs, the situation could change. "If more states wanted to do that and it became a higher percentage of the market, you could start to see problems," he adds.
The central problem for most states, say both Blumstein and Sparer is that they must try to use scarce resources to benefit the greatest number of people — while at the same time deciding on minimum levels of care everyone should have access to. Medicaid beneficiaries may have a harder time gaining access to certain medications, but overall more people on limited incomes could afford needed medications. It’s the same dilemma the nation as a whole is facing over the rising costs of health care, Blumstein adds.
"There is a moral principle to say that everyone should have the same thing that I would provide for my wife or my husband or my parents or kids," he notes. "But regrettably, not everyone is Bill Gates and we cannot afford as a society to treat everyone like they are."
Sources
• James F. Blumstein, PhD, Law School Building, Vanderbilt University, 2201 West End Ave., Nashville, TN 37235.
• Michael Sparer, PhD, 600 W. 168th St., Sixth Floor, New York, NY 10032.
State health policy experts and pharmaceutical company officials are anxiously awaiting the U.S. Supreme Courts decision on a controversial Maine program designed to help residents unable to afford prescription drug coverage get lower-cost medications.
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