Oregon’s efforts to rein in prescription spending have shown promising early results, despite federal rules that limit drug price negotiations, the Oregon Health Authority’s chief medical officer said Tuesday.
Federal law prohibits state Medicaid programs from negotiating with pharmaceutical companies to lower drug prices, Dr. Jim Rickards told the Oregon Health Policy Board. To get around that rule, and other restrictive regulations, the state has developed complex, labyrinthine efforts to hold down spending.
“The only thing we’re missing is a secret handshake,” Lynne Saxton, director of the Oregon Health Authority, joked at the conclusion of Rickards’ presentation.
But that complexity might create an opportunity for Oregon in Washington, D.C., at a time when many of the state’s efforts appear to be at odds with Republicans in Congress, said Leslie Clement, director of the health authority’s Health Policy and Analytics Division.
In his presentation on Medicaid pharmacy cost control, Rickards outlined a multi-pronged approach by state leaders and coordinated care organizations:
About 10 percent of Oregon Medicaid members are enrolled in a fee-for-service plan, rather than in CCOs. The state’s fee-for-service program has developed a preferred drug list based on the net cost to Oregon of buying those drugs.
The 16 CCOs that cover the remaining Medicaid members in Oregon each have their own preferred drug lists as well.
Drug makers can opt in to a federal drug rebate program that boosts their sales by making their products more affordable to state Medicaid programs, and the state buys through this program when it offers the most cost effective option.
Oregon is also one of 12 states enrolled in what’s called a “sovereign state drug consortium” that negotiates additional rebates, beyond the federal program.
But each of these efforts to hold down drug prices creates complications of its own, Rickards said.
Having more than a dozen different preferred drug lists used the state’s fee-for-service and CCO programs, for example, creates headaches and medication challenges.
“On the listening tour we took, this is one of the topics I heard about from both providers and patients,” said Dr. Joe Robertson, president of Oregon Health & Science University, serves on the policy board. When patients switch CCOs, they are often forced to change medication, he said, and providers in areas with multiple CCOs often must track multiple preferred drug lists to meet the needs of all their patients.
The federal drug rebate program also creates incentives that wind up costing the state more, rather than less, Rickards said, offering this illustration:
If a drug costs $100 on its list price, but has an $80 rebate, the net cost to purchase it for fee-for-service Medicaid members is $20.
When a CCO buys the same drug, that CCO must pay the $100 list price – then the state gets the $80 rebate, which it does not direct to the CCO.
As a result, if a $50 drug is available to treat the same condition, CCOs might opt to put the $50 drug on their preferred lists. The individual CCO saves $50 (compared to the $100 drug), but the state does not get a rebate. So the total cost to the state is greater.
Three U.S. states – Texas, Louisiana and Ohio – have developed statewide preferred drug lists, rather than allowing their in-state equivalents of CCOs to each develop separate lists. Texas and Louisiana determined that a statewide approach was not effective, while Ohio found its approach to be advantageous, Rickards said.
He cautioned that a statewide preferred list would take away local control over medication options, which could result in a less equitable and less flexible system.
Oregon Health Policy Board members and health authority leaders at the meeting encouraged Rickards to continue exploring tools to reduce Medicaid drug spending – and also expressed frustration at the hoops and administrative rules the state must follow because of burdensome federal rules.
“All these things are tactics in response to federal regulations,” Clement said.
“We need to start identifying the policy changes from the federal government that we think are important to pursue. This is the right time to do that,” she said, hinting that simplifying bureaucracy might be a rare area where Republicans leading health reform efforts in Washington, D.C., might see eye-to-eye with Oregon’s leadership.
“Simultaneously, we need to keep doing all the gymnastics that you describe, that are a response to those regulations,” she told Rickards. “We are not going to come up with a fix, because the problem does not exist at the state level. The problem exists at the federal level, in those regulations.”
Reach Courtney Sherwood at [email protected].
