Massachusetts denied in effort to choose Medicaid drug coverage

Massachusetts was met with denial by the Centers for Medicare and Medicaid in its attempt to choose which drugs are covered in its Medicaid program.

As reported in Modern Healthcare, although Medicaid usually covers all medications—albeit with some prior authorizations required—the state had hoped to avoid that in an effort to contain costs. Massachusetts had applied for a federal waiver to allow it to establish its own drug formulary similar to private insurance companies.

Related: Vermont’s first-in-nation law facilitates import of Canadian drugs

Had the state framed its request as a pilot or demonstration project, CMS said in a notice, it would have considered providing the waiver—but that’s not how the request was presented. Instead, said the report, CMS pointed out that Massachusetts wanted to be able to “exclude specific drugs based on cost-effectiveness or other approved criteria, or to employ a closed formulary structure similar to Medicare Part D or commercial plan formularies.”

That would mean it would have to forego rebates provided to Medicaid programs by drugmakers to make them more affordable, and then have to negotiate prices directly with manufacturers.

But the state wanted to keep the rebates, while at the same time preventing some drugs from being covered. CMS argued that such a move wasn’t allowable under federal law.

In the letter denying the request, Tim Hill, the CMS’ acting Medicaid director, writes, “The CMS supports the state’s goal of lowering drug costs and will continue to provide technical assistance on options to test innovative drug coverage mechanisms.”

According to Modern Healthcare, Massachusetts said it needed the waiver to tighten controls on Medicaid drug costs, which it says have risen 13 percent each year since 2010. Federal data indicate that Massachusetts’ share of Medicaid spending rose 20 percent from fiscal year 2013’s $6.4 billion to $7.7 billion in fiscal 2016.

“It is disappointing that our request to more effectively control rising pharmacy costs was not approved,” says Elissa Snook, a spokeswoman for the state’s Executive Office of Health and Human Services.

Launching a pilot program is not something the state wants to do, since it would have to give up rebates not on a select group of drugs but on all of them—which could boost its costs.

But CMS did approve—and on the same day as its denial of Massachusetts’ request—a request from Oklahoma to get extra rebates from drugmakers if clinical outcomes are not achieved from their products. The state is the first to be approved for that, but this action is not expected to have the impact that the one from Massachusetts would have had.