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    Runaway pharma costs tackled in new Medicaid plan


    New York Governor Andrew Cuomo’s new budget plan is looking to cap the prices of certain drugs, as well as for pricing transparency from pharmaceutical manufacturers.

    Related: When cheap drugs suddenly become expensive

    According to Politico, if Gov. Cuomo’s plan is approved by the state legislature, it would allow the state's health commissioner to develop a list of prescription drugs for which manufacturers would be required to provide a minimum rebate to Medicaid. The drug manufacturers on the list would then be required to provide a minimum rebate to Medicaid, which would be set by the state following an actuarial study. Additionally, Cuomo is proposing that drug makers provide information to the state, consumers, and prescribers on how they arrive at the price of their drugs. 


    “The governor has come out with some budget proposals directed at the pharmaceutical companies due to the rising cost of pharmacy items and its impact on the state budget— both directly based on what the state needs to pay or indirectly based on the impact to managed care plans which the state is paying premiums to for handling the Medicaid population,” explains Thomas Early, former managed care executive at Health Plus and Elderplan, both New York managed care plans involved in government programs.

    The executive budget for New York State proposes a host of pharmacy-related provisions that impact Medicaid managed care plans, according to Dennis J. Graziano, president and chief executive officer of YourCare Health Plan, Rochester, N.Y.  


    “The [budget] also authorizes the New York State [NYS] Department of Health to establish a list of critical prescription drugs and require manufacturers to supply information about said drugs to the state for purposes of setting a ceiling price,” Graziano says. “Under this provision, the NYS Department of Health may require the manufacturer to pay a rebate to the state if the price paid for the drug by managed care plans exceeds the ceiling price. The governor also proposes to establish a cap on the price of generic drugs, which recently have seen dramatic price increases.”

    Without question, the fastest growing cost center for health plans continues to be our pharmacy benefit, Graziano adds. “The introduction of higher cost drugs and increased utilization drives additional costs to the plans and ultimately to the state as the payer for Medicaid managed care. Higher cost drugs, both brand and generic, are driving costs up, faster than medical inflation,” he says.

    Early agrees and says that pharmacy costs have had a direct impact on the budget because of the continued rise in the costs of drugs, particularly new drugs, that are brought to the market, says Early. Two of those are hepatitis C drugs Sovaldi and Harvoni.

    “Although the long-term impact may reduce costs overall for someone with hepatitis C, the immediate costs are significantly high,” Early says. “The course of treatment for one of these drugs is somewhere from $60,000 to $90,000 over a period of a two- to three-month treatment. There are other new drugs out there that are also throwing pharmacy budgets way out of line. Even generic drug pricing has been growing faster than medical inflation.”

    Next: State budgets impacted


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