Feds Reject Massachusetts' Unprecedented Idea for Lowering Drug Prices

by | June 28, 2018

By Michael Ollove

The Trump administration turned down Massachusetts’ first-in-the-nation request to exclude certain drugs from its Medicaid program to gain bargaining power with pharmaceutical companies over prices.

Under current law, all state Medicaid agencies must carry all drugs approved by the U.S. Food and Drug Administration in return for drugmakers providing statutorily determined rebates. In its request, Massachusetts said that if it had the power to exclude drugs from its Medicaid plan, it would be able to extract better prices.

In its application to the Centers on Medicare and Medicaid Services (CMS), Massachusetts said that high prices for prescription drugs, particularly for specialty drugs, are financially crippling for its Medicaid agency. Massachusetts’ Medicaid spending on prescription drugs rose by 19 percent between 2014 and 2016, according to the state Department of Health and Human Services.

In its denial, CMS said it “supports the State's goal of lowering drug costs, and will continue to provide technical assistance on options to test innovative drug coverage mechanisms.” However, the agency noted that in its application, the state said it expected to continue receiving manufacturing rebates even while trying to negotiate better prices with drugmakers. That, CMS said, would violate federal law.

Massachusetts hoped to operate a closed Medicaid formulary — the list of drugs covered by a health plan — just as Medicare Part D and commercial insurers do now. The state also proposed to conduct its own evaluation of the effectiveness of new drugs in relation to other drugs in the same class, and use that information to get better prices from manufacturers.

Under its plan, the state could have only excluded drugs if other medications in its formulary treated the same illnesses or conditions. It also established an appeal process for patients to challenge the exclusions.

Many organizations advocating for patients with specific illnesses such as cancer and heart disease opposed Massachusetts’ application, saying the plan would deny life-saving medication to patients. The pharmaceutical industry also opposed the proposal.

Even while turning down Massachusetts’ application, the Trump administration has indicated that it wants to launch pilot projects in five states to experiment with closed Medicaid formularies and negotiated prices with drugmakers. Based on yesterday’s ruling, however, it appears that states would have to forgo at least some of the rebates they receive now.

Stateline | Nonpartisan, Nonprofit News Service of the Pew Center on the States | editor@stateline.org  |  @pewstates