Featured Health Business Daily Story, Oct. 17, 2016

State Medicaid Programs Fail to Prefer Brands Over Generics (with Charts: Antipsychotics Cause Big Swings in Claims Cost)

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By Jane Anderson, Senior Writer
October 7, 2016Volume 17Issue 19

State Medicaid programs are failing to take advantage of savings opportunities offered by rebates that make brand-name prescription drugs preferable to generics, according to a report from Magellan Rx Management that examines drug use and cost savings opportunities within Medicaid fee-for-service.

Maximizing brand-over-generic opportunities in Medicaid, using preferred drug lists (PDLs) and implementing utilization management with clinical criteria are the three most effective practices to help control pharmacy spend, says Doug Brown, vice president, pharmacy pricing and value-based solutions for Magellan Rx, a unit of Magellan Health, Inc.

But there are barriers to effective utilization of those cost-savings opportunities, and these hurdles can cause states to implement the practices selectively, the report concludes.

“For example, pharmacies prefer to stock generics instead of their clinically equivalent brands once they become available because it is a lower inventory cost for the pharmacies, and because commercial benefit pricing drives a higher volume of plan holders’ utilization toward generics,” Brown tells DBN.

Overall, the report, developed from state-level data retrieved from Magellan Rx’s fee-for-service Medicaid business, found that the increase in net cost per claim from 2014 to 2015 was $1.26, or 3% year-over-year. Meanwhile, the increase in gross cost per claim was $9.17, or 10.7% year-over-year.

Antipsychotics were by far the main driver of increased costs, contributing $1.01 of the $1.26 change in net cost per claim, the report said. The report specifically cited Abilify, which saw an uptick in use of the equivalent generic, aripiprazole, despite limited supply and high costs associated with the generic. Aripiprazole contributed a $1.05 increase in the net cost per claim, while Abilify contributed a 23-cent decrease in the net cost per claim (see chart, p. 4).

“The price discrepancy between Abilify and aripiprazole was universal in Medicaid; all states would have benefited from making the brand preferred,” the report said. However, the report’s analysis shows that either states didn’t grant the brand preferred status or providers didn’t listen.

Drug Benefit News

In addition, several therapeutic classes continue to be restricted from PDL review, which “is an antiquated practice,” the report said. Restricted classes included HIV/AIDS and antihemophilic factors.

“These classes, along with various oncology products, are the next frontier of PDL program management,” the report said. “There was a time when antipsychotics was thought to be an untouchable class; now, review of these products is commonplace, though still not universal among Medicaid programs.” At the same time, it’s critical that state Medicaid plans couple PDL reviews with appropriate clinical criteria, the report adds.

Brown notes that “conversations are already occurring with both states and manufacturers in terms of how to better manage expenditures” for HIV/AIDS medications and antihemophilic factors. “For example, there are significant savings even with brand over generic,” he says.

Outsourcing Rx Benefit Has Some Costs

Since 2010, multiple states have turned to Medicaid managed care organizations (MCOs) to oversee the pharmacy benefit, rather than trying to optimize management in the state-operated fee-for-service program, the report said. This can help the bottom line in some states, but “all government levels must recognize the impact of lost federal and supplemental rebates,” the authors wrote.

The Magellan Rx evaluation finds that states moving the pharmacy benefit into an MCO typically experience a 6% decline in federal rebates and total loss of supplemental rebates. “Supplemental rebates disappeared due to the loss of PDL control at the state level; federal rebates declined due to the shift to generic utilization since Medicaid MCOs operate under a commercial economic system focused primarily on pharmacy reimbursement.”

The report recommends that states consider supplemental rebate negotiation and evaluation, as well as net cost monitoring, as strategies to save more money on prescription drugs in Medicaid.

Supplemental rebate negotiation and evaluation saved states more than $1.3 billion from 2014 to 2015, while preferring brand drugs over generic equivalents saved states $86 million, or an average of $158 per claim, in the fourth quarter of 2015 alone, the report said.

Meanwhile, Brown says that strategies commonly used in commercial plans — including copay differentials, preferred retail/specialty networks, mail order and tiered formularies — don’t translate to Medicaid drug benefit management. “If a Medicaid recipient cannot afford a copay, the pharmacy is still obligated to dispense the medication,” he says.

And National Drug Code (NDC) blocks aren’t an option in Medicaid, either, because all drugs whose manufacturers sign a federal rebate agreement with CMS must be made available in Medicaid, Brown says.

Finally, the report shows that specialty drug spend is expected to reach 50% of total Medicaid drug spend by 2018, Brown said, adding, “this is an evolving challenge within the Medicaid space. It’s critical to approach medical pharmacy management as part of a comprehensive specialty strategy. We are conducting ongoing conversations and actively working with states to enhance their PDLs and expand preferred product coverage beyond the retail pharmacy.”

View the Magellan Rx report at http://tinyurl.com/gqesz3z.

Antipsychotics Cause Big Swings in Claims Cost

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SOURCE: Magellan Rx Management, Medicaid Trend Report, 2016 edition, released September 2016. To download, visit http://tinyurl.com/gqesz3z.

© 2016 by Atlantic Information Services, Inc. All Rights Reserved.


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