“It is safe to say this policy surprised everyone, including state’s own (pharmacy benefit manager Magellan Rx),” Pallone said. “There was no discussion of it. No rollout to those affected other than proposed policy brief. We have been told the (state) budget is unbalanced and there is need to identify areas of savings.”
Pallone said Medicaid HMOs want to work closely with the state on “how their math works out” to avoid driving up costs on Medicaid and for beneficiaries. He said the state has not yet shared its methodology on projected savings.
“We have been told by the Medicaid director (Kate Massey) the state projects to save $10 million in general funds and $41 million overall,” said Pallone, adding that the association has been promised an opportunity to review the state’s methodology.
“I trust the director, but would like to verify and validate the department’s estimates” on savings, Pallone said. “We would like to see the math.”
In the Sept. 30 public policy draft, MDHHS said it was using the amended 2019-2020 state budget — where Whitmer line-item vetoed nearly $1 billion of the $59.9 billion budget and shifted $625 million within state departments — as an opportunity to announce the proposed change in how the state pays for Medicaid outpatient drugs.
Gordon suggested that savings garnered in rebates and health plan administrative savings could be used to expand care for people on Medicaid.
When a reporter asked why Michigan would move in the same direction that Snyder did four years ago, only to back off, Gordon said California is looking “very hard at going this way. We believe there will be savings.”
In January, California Gov. Gavin Newsom issued an executive order to carve-out Medicaid pharmacy benefits by January 2021.
“While the amount of net state savings is highly uncertain at this time, we believe it could potentially be in the hundreds of millions of dollars annually,” according to a California legislative analysis in April. “Primarily, these state savings are likely to arise as a result of the state paying for all drugs dispensed by pharmacies to Medi Cal beneficiaries at pharmacies’ cost of purchasing the drugs as is done in fee-for-service.”
Now, under California’s Medicaid managed care program, drugs are paid for at prices negotiated between pharmacies, drug manufacturers and managed care plans. “These negotiated prices, particularly for drugs that receive steep, upfront discounts under a federal drug discount program known as the 340B program, are often higher than what the state would otherwise pay under fee-for-service, raising the cost of the Medicaid pharmacy services benefit,” the state analysis concluded.
But Pallone said Medicaid plans believe if the state goes in this direction it probably will cost more in the end.
“California and Michigan are rebate-chasing if they think they can create a larger purchasing pool to drive down drug costs than national pharmacy benefit managers” such as Express Scripts and CVS Health, he said.
“I recognize that states get supplemental rebates from manufacturers, additional rebates than health plans can’t get, but the state can’t negotiate” lower prices than large PBMs, Pallone said.
Another factor that Pallone doesn’t think has receive enough attention is the state’s plan to charge Medicaid recipients a new drug copayment.
“This is big news that people are not latching onto it yet, an increase in out-of-pocket costs to consumers,” Pallone said. It is common knowledge that “when you charge someone at point of service, your utilization falls.
“This is a total distraction from all the work that needs to be done on Healthy Michigan,” he said.
In its policy proposal, MDHHS said that an outpatient prescription co-payment could be charged “for each prescription dispensed to beneficiaries age 21 years and older,” according to Medicaid fee-for-service policy.
Pallone said requiring Medicaid members to pay co-payments could mean people skipping medications because they can’t pay.
Under the proposed policy, Medicaid Health Plan Pharmacy Drug Coverage Transition, MDHHS said affected programs would include Medicaid, Healthy Michigan Plan, Children’s Special Health Care Services and Maternity Outpatient Medical Services.
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