Internet Explorer 11 is not supported

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

Medicaid's Take on Pills

With health care expenses running out of control, several states are taming at least a piece of their fastest-growing cost.

Medicaid has re-emerged as a budget buster, forcing many states to work on reining in costs in the area where they are running up fastest: prescription drugs. At least 21 states went into this year's legislative sessions with an eye on prescription drug laws that target rising costs.

Several states have already started down that road. The early results suggest that there are significant savings to be had, especially by setting limits on the use of various name-brand drugs. At the same time, drug manufacturers and some physicians claim the approach takes a toll on the health of needy populations.

Maine, which cut $15 million from its Medicaid budget--50 percent more than expected--got those savings by steering doctors toward prescribing generics and lower-cost alternatives to expensive name- brand drugs. Doctors can still prescribe the name brands but must call a state-sponsored hotline to get permission first.

This prior authorization has had a dramatic effect. In 2000, Maine spent $8 million on prescriptions for Prilosec, the so-called "purple pill" that helps people who suffer from chronic heartburn. Last year, Maine spent only $1.8 million on Prilosec as doctors switched Medicaid patients over to an equivalent but cheaper alternative. The alternative cost the state $7 million, but it was able to fill close to twice as many prescriptions.

Florida, a much bigger state with a larger population of seniors, lowered its drug budget by nearly $250 million last year. With the cost of prescription drugs growing at a rate of 30 percent a year, Florida first tackled the problem in 2000 by limiting most Medicaid enrollees to four name-brand prescriptions a month, for a savings of $120 million. Then, last year, the state came up with a preferred drug list--with an unusual twist. In order to get their products on the preferred list, drug makers must either offer steep discounts or pay for health programs aimed at containing other Medicaid costs. Pfizer and Bristol-Myers Squibb signed on and guaranteed Florida a combined $49 million in savings by paying for disease prevention and management programs.

Yet PhRMA, the group that represents the major drug companies, is suing to stop the Florida program. It is also taking Michigan to court over its preferred list, which aims to extract even deeper discounts from drug makers. According to PhRMA, limiting access to drugs not only violates federal law but is bad health policy. "Pharmaceuticals save money if they are used properly and given as primary medicine," says Jan Faiks, PhRMA's assistant general counsel.

Some doctors aren't happy with preferred lists, either. While the states have tried to make the process for authorizing non-listed drugs simple, doctors are still stuck making phone calls, typing e-mails and sending faxes to get prescriptions approved. Plus, many doctors don't like having the state tell them what is and isn't good medicine. "Not all patients do as well on the cheaper drugs," says Gordon Smith, executive vice president of the Maine Medical Association. "Most of them do, but we sacrifice a few who get injured along the way."

Kevin Concannon, Maine's health commissioner, argues that it is possible to get patients the drugs they need at a reasonable cost. The proof? Maine bought 700,000 more prescriptions in 2001 than in 2000, even as the cost dropped from $56 per prescription to $53. "What we're doing is reversing some of the effects of all the advertising drug makers do on cable TV," says Concannon, who has been sued for other steps Maine has taken on prescription drugs. "The more states take an active role in this, the higher the likelihood that the prescription drug manufacturers will want to sue for peace."

Special Projects