NCPA explains how PBM tools can reduce costs in Texas, other states

Texas and other states across the country could save billions in Medicaid without limiting access by transitioning to a more efficient and affordable pharmacy benefit model being used in Medicare and the commercial sector, the National Center for Policy Analysis (NCPA) announced in a new white paper, "Increasing the Cost-Effectiveness of Medicaid Drug Programs."

NCPA, based in Dallas, Texas, is a nonprofit, nonpartisan public policy research organization that develops private, free-market alternatives to government regulation and control that rely on the strength of the competitive, entrepreneurial private sector.

This new research confirms the findings from a recent study, which found that federal and state governments could save $33 billion over the next decade by managing pharmacy benefits more like Medicare and commercial programs.  To help reduce state Medicaid spending, Governor Rick Perry (R) has proposed that the program's prescription drug benefits be operated more like those in the private sector that are more affordable and efficient, which Texas has conservatively estimated would save taxpayers $84 million in the first year alone.

"This latest research confirms that Governor Perry and Texas policymakers are on the right track.  Medicaid shouldn't pay more for drug benefits than private insurers and Medicare," said PCMA President and CEO Mark Merritt. "Currently, the program uses fewer generic drugs and pays drugstores more than triple the fees that Medicare or private insurers pay.  By modernizing Medicaid drug benefits, Texas will save $3.8 billion over the next decade without cutting benefits to those in need."  

NCPA outlined a number of strategies to better manage and lower Medicaid pharmacy costs, including:

• Increasing utilization of generic drugs;
• Negotiating competitive dispensing fees;
• Improving drug utilization controls; and
• Negotiating discounts and reimbursements with drugmakers similar to commercial sector.

Recent polling finds voters would rather modernize Medicaid pharmacy than cut benefits for patients or payments to doctors and hospitals. In addition to Governor Perry, Governors Chris Christie (R-NJ) and Andrew Cuomo (D-NY) have already proposed such changes to reduce prescription drug spending in their own states.

Many state Medicaid programs pay too much for prescription drugs because they use an archaic, fee-for-service approach in which state officials set payment rates and are therefore constantly lobbied to inflate them by special interests like pharmacists.  To avoid this trap, most non-Medicaid drug benefits programs – like those offered by Medicare, employers and unions – rely upon independent, third party pharmacy benefit experts to negotiate competitive rates with pharmacies. These programs also reduce costs by employing cutting-edge, market-proven strategies to increase the use of generics.