Internet Explorer 11 is not supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.

On Drug Prices, Trump Administration Sends Mixed Messages

It has accepted one state's unprecedented proposal to lower the cost of prescriptions but rejected another's.

President Donald Trump speaks during an event about prescription drug prices with Health and Human Services Secretary Alex Azar.
(AP/Carolyn Kaster)
Last month, the Trump administration approved a first-of-its-kind proposal to lower drug prices.

Oklahoma will now be allowed to negotiate Medicaid drug prices based on the effectiveness of the medicine. The state will only pay full price for a drug if it's proven to work. If not, then the state will only pay a fraction of that cost.

“Oklahoma’s plan for value-based drug contracts is an important example of how states can innovate to bring down drug costs,” said Alex Azar, secretary of the U.S. Department of Health and Human Services, in a statement announcing Oklahoma's program.

Other states have already reached out to Oklahoma to learn more about the approach, says Nancy Nesser, pharmacy director for the Oklahoma Health Care Authority, which administers the state’s Medicaid program.

“[Pharmaceutical companies] have done some similar things in the commercial space and wondered why they can’t do that with us,” she says.

While most private insurance plans can and will refuse to cover drugs when there is a cheaper or generic alternative, state Medicaid programs are required to cover every drug approved by the Food and Drug Administration. 

The Oklahoma decision by the federal Centers for Medicare and Medicaid Services came on the same day the agency declined another state's unprecedented drug pricing waiver. Massachusetts wanted to exclude certain drugs from Medicaid coverage in order to gain bargaining power over prices. CMS rejected that proposal out of concern that parts of it would violate federal law.

States already receive a discount for prescriptions -- sometimes up to 50 percent -- through the Medicaid Drug Rebate Program, but Nesser says it's not enough. Prescription drugs cost Medicaid programs $32 billion in 2015 -- up from $28 billion in 2014, according to the Kaiser Family Foundation.

If CMS had approved Massachusetts’ waiver, it would have "signaled more coming changes to the drug rebate program," says Ross Margulies, a health-care attorney with the firm Foley Hoag. Instead, he says, the approval of Oklahoma’s proposal means CMS is likely only open to more modest changes in how states pay for prescription drugs.

In its rejection, CMS said that Massachusetts could end its participation in the rebate program and come up with a state-specific alternative. That would be an incredibly heavy lift, says Margulies. “But if any state were to try something like that, it could be Massachusetts,” which pioneered the framework for the Affordable Care Act.

Oklahoma’s program is voluntary for pharmaceutical companies. One company joined this month and a couple of others are in negotiations with the state.

“Some of the smaller companies have really been open to it, and some of the bigger companies haven’t," Nesser says. "That really has surprised me. I figured it’d be the other way around.”

It's up to the state to decide if drugs are working as intended -- a process Nesser says will be labor-intensiveThe state will primarily use refill data to track outcomes. If people aren't refilling a certain prescription, the state can assume it's not working correctly. 

"One thing we've learned is that some companies don't really stand behind their drugs, and it's kind of scary. ... We're paying a premium for them, and they're not willing to say that they will work," Nesser told the Associated Press

There is some skepticism among health experts about how much money Oklahoma will actually save. Nesser admits that they’re expected to just save “a couple of million” in a program that spends $650 million on prescription drugs a year.

“Will this be a watershed program? I don’t think so. But I also don’t want to downplay it because this is the first time we’ll see true outcomes-based pricing in the Medicaid program," says Margulies. "It is a clever way to get around best-price rules."

This appears in the Health newsletter. Subscribe for free. 

Mattie covers all things health for Governing.

Special Projects
Sponsored Stories
Workplace safety is in the spotlight as government leaders adapt to a prolonged pandemic.
While government employees, students and the general public had to wait in line for hours in the beginning of the pandemic, at-home test kits make it easy to diagnose for the novel coronavirus in less than 30 minutes.
Governments around the nation are working to design the best vaccine policies that keep both their employees and their residents safe. Although the latest data shows a variety of polarizing perspectives, there are clear emerging best practices that leading governments are following to put trust first: creating policies that are flexible and provide a range of options, and being in tune with the needs and sentiments of their employees so that they are able to be dynamic and accommodate the rapidly changing situation.
Service delivery and the individual experience within health and human services (HHS) is often very siloed and fragmented.
In this episode, Marianne Steger explains why health care for Pre-Medicare retirees and active employees just got easier.
Government organizations around the world are experiencing the consequences of plagiarism firsthand. A simple mistake can lead to loss of reputation, loss of trust and even lawsuits. It’s important to avoid plagiarism at all costs, and government organizations are held to a particularly high standard. Fortunately, technological solutions such as iThenticate allow government organizations to avoid instances of text plagiarism in an efficient manner.
Creating meaningful citizen experiences in a post-COVID world requires embracing digital initiatives like secure and ethical data sharing, artificial intelligence and more.
GHD identified four themes critical for municipalities to address to reach net-zero by 2050. Will you be ready?
As more state and local jurisdictions have placed a priority on creating sustainable and resilient communities, many have set strong targets to reduce the energy use and greenhouse gases (GHGs) associated with commercial and residential buildings.