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New Alzheimer’s drug could balloon state Medicaid budgets

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Medicaid may be left with all the cost of the new drug if Medicare does not cover it.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.



New Alzheimer’s drug could balloon state Medicaid budgets – STAT


A decision by Medicare not to cover Aduhelm would cost the Medicaid program an estimated $1.9 billion more in fiscal year 2022.



A new drug that was supposed to be a lifeline for thousands of individuals and families struggling with the tragic impacts of Alzheimer’s disease is evolving into a millstone around the neck of Medicaid, America’s largest safety net health insurer.

The Medicaid program, which today connects one in every four Americans to the health care they need, is an essential part of the U.S.’s health care fabric. But a recent decision by the Food and Drug Administration to approve Aduhelm, an unproven and exceptionally costly new drug to treat the symptoms of early Alzheimer’s disease, could threaten Medicaid’s ability to continue to serve the millions of people who rely on the program.

Medicaid operates independently in each of the nation’s 56 states and territories. It is a “first responder” during economic downturns and for natural disasters and pandemics. It is the largest provider of mental health and behavioral health services. Forty percent of all children rely on Medicaid for comprehensive health care benefits, and the program finances 50% of all births in the U.S.

Medicaid now overshadows its sister program, Medicare, in terms of total number of people covered. Medicaid also supports the Medicare program for low-income seniors and individuals with disabilities by paying for its sizable premiums, co-pays and deductibles. It also pays for comprehensive nursing home care and home and community-based options for seniors with low incomes.

There’s no question that curing or treating Alzheimer’s, or at the very least delaying its onset, is a priority for all sectors of the health care landscape, as 5 million Americans and their families are currently living with the disease. But the most recent development in this sphere could burden state Medicaid programs with an expensive product with questionable evidence of effectiveness.

The FDA’s approval of Aduhelm, a drug meant to slow the progression of the disease, has been touted as a potential cost saver for the Medicaid program by reducing the number of seniors with dementia who will need long term care. It’s likely to do just the opposite.

The Medicare program has just embarked on a comprehensive review of Aduhelm, which may lead to the federal program deciding to cover it for a narrow set of individuals, or not cover it at all. This may well be the smart decision for a product with a $56,000 price tag and questionable evidence of success. The Institute for Clinical and Economic Review believes a price between $3,000 and $8,400 is more appropriate.

A decision by Medicare not to cover Aduhelm will shift all of the costs entirely to the Medicaid program, which is required by federal law to cover all FDA-approved drugs, no matter how poorly they work. Based on a survey conducted on behalf of the National Association of Medicaid Directors, which I direct, Medicare’s decision not to cover Aduhelm would cost the Medicaid program an estimated additional $1.9 billion in fiscal year 2022.

State Medicaid programs can ill afford to waste valuable resources — particularly in the midst of a pandemic — on high-cost, low-value treatments. Compounding this budget reality is the fact that Aduhelm is not intended to cure Alzheimer’s, so in all likelihood individuals who are prescribed it will take it for the rest of their lives, compounding the long-term costs of covering it.

The federal government must take immediate action to ensure that these costs are not irresponsibly shifted onto the Medicaid program. One straightforward reform might be to allow state Medicaid programs the authority to cover — or not cover — Aduhelm in alignment with Medicare’s decision.

Aduhelm is just the most recent example of the challenges Medicaid faces in sustaining its ability to provide high-value and cost-effective care for the tens of millions of Americans who rely on it. There are further reforms that will still need to be made as future products like Aduhelm that carry both astronomical price tags and little evidence of their clinical effectiveness receive FDA approval. Medicaid must have a more sensible, longer-term solution to how it covers and pays for those products.

Matt Salo is the executive director of the National Association of Medicaid Directors.




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Centene reaches $72M settlement with Illinois, Arkansas for alleged Medicaid overcharges

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2 more states have been paid out from the $1.1B settlement fund Centene set aside to deal with PBM scandal issues.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


Samantha Liss for Healthcare Dive

UPDATE: Oct. 1, 2021: Centene said in a statement: “We respect the deep and critically important relationships we have with our state partners. These no-fault agreements reflect the significance we place on addressing their concerns and our ongoing commitment to making the delivery of healthcare local, simple and transparent.”

Dive Brief:

  • Attorneys general for Arkansas and Illinois announced Thursday they both reached multi-million dollar settlements with Centene after the insurer allegedly overcharged their respective state Medicaid programs for prescriptions.
  • The alleged overages occurred after Centene subsidiary Envolve Pharmacy Solutions failed to disclose relevant discounts, Arkansas Attorney General Leslie Rutledge claims. Centene also improperly inflated dispensing fees, Illinois Attorney General Kwame Raoul alleged.
  • Centene will pay Illinois a total of $56.7 million in two installments over the next 12 months and $15.2 million to Arkansas in a similar arrangement.

Dive Insight:

The latest settlements come just months after Centene reached similar agreements in Ohio and Mississippi, in which the St. Louis-based insurer agreed to pay a total of $143 million to resolve allegations of overcharging the two states for medications.

The state of Ohio dropped its lawsuit against Centene as a result of the settlement. The payer did not admit fault in the settlements, but at the time the company set aside $1.1 billion to resolve future disputes in other states, according to a previous filing with the U.S. Securities and Exchange Commission.

In a series of tweets on Thursday, Rutledge explained that Centene’s Envolve was tasked with managing the state’s prescription drug program and was contracted to reimburse pharmacies, create preferred drugs lists and negotiate rebates with other pharmaceutical companies.

“When Envolve charged Arkansas Medicaid for the drugs, contracts required the costs to be capped by certain industry-standard prices, however Envolve charged Arkansas Medicaid more than the allowed price cap,” Rutledge tweeted.

Centene did not immediately respond to a request for comment.

Pharmacy benefit managers have come under fire in recent years for the opaque ways in which they operate and their role in rising drug costs. PBMs’ less-than-transparent business model has previously garnered scrutiny from lawmakers interested in tackling drug pricing reform.



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Medicaid Subscription-Based Payment Models Show Mixed Results

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LA and WA had very different results in uptake and outcomes, and it may be because of pent up demand differences.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


Louisiana and Washington both implemented subscription-based payment models, but the states saw disparate results.


Source: Getty Images


By Kelsey Waddill

September 06, 2021 – Using a subscription-based payment model to cover medication costs could have varying impacts on access to medication depending on the state that implemented the model, according to a study published in JAMA Health Forum.

Researchers analyzed the uptake of an antiviral hepatitis C virus drug in two states after each state implemented a form of subscription-based payment model. 

Louisiana received CMS approval for its hepatitis C subscription-based payment model in 2019. The state’s model established a supplemental rebate agreement with Asegua Therapeutics for the drug. Based on the agreement, Louisiana has an unlimited right to use the drug, Epclusa, with a capped cost that the state pays over time.

On top of covering hepatitis C medications for the patient population within the justice system, the model also screened and treated prisoners and covered continued care after release. The goal was to treat 31,000 prisoners with hepatitis C or more by December 2024, specifically the model aimed to treat 10,000 in the first year of its implementation.

CMS approved Washington state’s subscription-based payment model less than a month before greenlighting Louisiana’s model. Like Louisiana’s, Washington’s plan for lowering drug spending for hepatitis C was to enter into a value-based contract that allowed the state to use limitless quantities of the drug at a fixed rate.

Washington’s model aimed to create and cure 4,900 individuals between its implementation date in June 2019 and June 2020.

The JAMA article’s researchers used data pulled from the states’ Medicaid State Drug Utilization Data files. They analyzed data from January 2017 through June 2020, with the post-implementation observation period lasting from July 2019 through June 2020. 

The researchers also used data from the Centers for Disease Control and Prevention’s (CDC’s) National Notifiable Diseases Surveillance System to know the incidence of acute and chronic hepatitis C in the relevant regions.

In Louisiana, the rate of acute hepatitis C viral infections stayed stable but the rate of chronic hepatitis C viral infections grew pre-implementation and then declined in 2019 when the state implemented its subscription-based payment model.

The state saw an increase in prescription fills per after the implementation, with quarterly fills rising from 43.1 prescriptions filled per 100,000 Medicaid enrollees to 206.0 prescriptions filled per 100,000 enrollees.

Meanwhile, in Washington quarterly prescription fills rose only slightly, increasing from 50.1 fills per 100,000 Medicaid enrollees before implementing the subscription-based payment model to 53.9 fills per 100,000 enrollees after implementation.

Why did Louisiana and Washington state have such different outcomes with subscription-based payment models, despite having very similar methods?

One key difference between the two states’ scenarios was that before Louisiana implemented the subscription-based payment model, it had a restriction on who could receive coverage for hepatitis C medications based on liver damage and sobriety. Washington had no such limitations before or after implementing its model.

“The heterogenous response of these 2 states to implementation of a SBPM may be partially attributable to historical access to direct-acting antiviral HCV medications, differences in SBPM implementation, and the onset of the COVID-19 pandemic,” the researchers explained.

However, on the last point, the researchers noted that excluding the second quarter of 2020 to mitigate the potential influence of the coronavirus pandemic did not change the results.

Furthermore, the researchers used a synthetic control model to eliminate those differences and found that Louisiana still had a 180 percent relative increase in prescription fills.

“Nonetheless, the disparate influence of SBPMs in Louisiana and Washington suggests that states with greater pent-up demand for HCV medications may expect to see larger gains in use from a SBPM,” the study added.

Alternative reasons for the different results could include one state having a superior screening and treatment process or simply a process that was less susceptible to the influence of the coronavirus pandemic.

Still, the researchers concluded that subscription-based payment models have potential to expand access to expensive prescription drugs.

As public and private payers combat rising prescription drug prices, they have implemented various innovative payment models to manage this area of healthcare spending. Apart from subscription-based payment models, some Medicaid programs have implemented outcomes-based payment models and population-based payment models.


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Study: Carving Out Hepatitis C Therapies from Medicaid Managed Care Increases Use

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Removing managed care as a control mechanism for utilization led to increased authorization of Hep-C drugs.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


Greater uptake of hepatitis C medication may help improve the health of Medicaid enrollees and reduce the economic burden of untreated hepatitis C on the U.S. healthcare system, the authors said.

Carve-out benefits of antiviral hepatitis C medications from Medicaid managed care prescription drug coverage can increase access and reduce economic burden of untreated hepatitis C infections, according to a recent study published in JAMA Health Forum.

A growing number of states have begun to carve out, or provide a separate coverage, for direct-acting antiviral hepatitis C medications, according to investigators. Instead of being covered by Medicaid managed care plans, these therapies are financed in some states through fee-for-service state Medicaid programs.

This study examined changes in prescriptions for Medicaid-covered direct-acting antiviral hepatitis C medications in four states (Indiana, Michigan, New Hampshire, and West Virginia) that carved out these drugs from Medicaid managed care between 2015 and 2017.

A synthetic control approach was used to compare changes in prescriptions between states that did and did not carve out these medications from January 2015 to June 2020.

State Medicaid programs often limit access to hepatitis C medications because of their high cost, with list prices ranging from $25 000 to $95 000 for a single course of treatment. Historically, access was limited through prior authorization requirements.

Investigators found that in the four states that implemented a fee-for-service coverage of hepatitis C medications, there was a mean quarterly increase of 22.1 prescriptions per 100,000 Medicaid enrollees, a relative increase of 86.3% compared with synthetic control states.

Prescriptions increased from 35.7% (Indiana) to 256.2% (New Hampshire) compared with their respective synthetic control states. Differences in medication use between treated states and synthetic control states also appeared to narrow over time. The authors speculate this may reflect pent-up demand for treatment for hepatitis C.

“Carve outs of high-cost medications may thus represent an important strategy for states to increase access to these medications, especially when combined with other approaches,” the authors wrote. “Under a capitated payment model, Medicaid MCOs face financial risk in delivering coverage of health care for their enrollees and have a limited set of strategies to mitigate this risk.”

An estimated 2.4 million people in the United States were living with hepatitis C during 2013–2016, according to the Centers for Disease Control. Of every 100 people infected with hepatitis C about five to 25 will develop cirrhosis within 10 years to 20 years. Patients who develop cirrhosis have a 1% to 4% annual risk of developing hepatocellular carcinoma and a 3% to 6% annual risk of hepatic decompensation, which is defined as acute deterioration in liver function and is characterized by jaundice, ascites, hepatic encephalopathy, hepatorenal syndrome or variceal hemorrhage.


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Aduhelm could be a strain on Medicaid

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A new Alzheimer drug could add 7% to the overall Medicaid spending annual bill (not just drugs).


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.



A vial and packaging for the drug Aduhelm. A previously announced investigation into Aduhelm, an expensive and unproven therapy, has sparked scrutiny since winning US approval last month.Associated Press

Biogen’s pricey new Alzheimer’s drug could cost Medicaid anywhere from $720 million to nearly $2.2 billion each year depending on the number of patients treated, according to a new analysis.

Aduhelm, which carries a $56,000 price tag, is generating concern over its potential impact on the overall health care system. The Centers for Medicare & Medicaid Services, for instance, is about to begin a process for determining whether Medicare will establish a national coverage policy for the Cambridge biotech’s drug, which is and won regulatory approval last month.

But the path taken toward approval was complicated and controversial, raising concerns about regulatory approval standards and the extent to which patients may actually benefit.

The budget-busting prospects were initially prompted when the Food and Drug Administration approved a so-called broad label, which suggested a large portion of the estimated 6 million Americans who have Alzheimer’s may seek treatment. Earlier this month, though, the FDA narrowed the scope of the label to patients with mild cognitive impairment or mild Alzheimer’s, the only patients studied by Biogen.

The drug maker believes this will lower the potential patient population to 1 million to 2 million people, most of whom are expected to be Medicare beneficiaries, since the Alzheimer’s population is largely age 65 and over. But if 500,000 people were treated with the medicine, Medicare would spend $29 billion annually, according to a recent Kaiser Family Foundation analysis.

But Medicaid ― which offers health insurance for low-income and disabled people ― is expected to spend much less, since about 67,000 beneficiaries used existing Alzheimer’s drugs, according to a new Kaiser analysis. If 25 percent of these beneficiaries switched to Aduhelm, the total cost would be approximately $720 million, with the states spending $230 million and the federal government covering $490 million.

Yet Medicaid would have to open its wallet further if 75 percent of those same beneficiaries switch to Aduhelm. If that were to happen, the cost to the program would be more than $2.1 billion, which is equal to seven percent of current Medicaid net spending. Under this scenario, states would spend $695 million and the federal share would be $1.47 billion.

Looked at another way, average state and federal spending per enrollee would reach $13,800 and $29,200, respectively. These figures, by the way, reflect mandatory 23.1 percent rebates that drug makers must offer Medicaid, although Kaiser acknowledged that costs may drop if higher rebates are paid or if fewer patients are treated.

For instance, the Medicaid and CHIP Payment and Access Commission, an agency that makes policy recommendations concerning Medicaid, recently proposed increasing minimum rebates for medicines approved under the FDA accelerated approval program Kaiser noted the Congressional Budget office assumed a 10 percent increase. Separately, the CBO found rebates for so-called specialty drugs were 29 percent of retail prices. Kaiser also noted that state Medicaid programs may use criteria to stem usage, which would lower the cost per person.

A recent analysis by the Institute for Clinical and Economic Review said that Aduhelm would only have sufficient value if it were priced between $3,000 and $8,400, which represents an 85 percent to 95 percent discount off the $56,000 list price, due to “insufficient” evidence that the drug benefits patients.

The cost concerns are only one aspect of an intensifying controversy over the drug.

Acting FDA commissioner Janet Woodcock has asked the Office of Inspector General at the Department of Health and Human Services to open an independent investigation into the recent approval. Some Congressional lawmakers and Public Citizen, the consumer advocacy group, have also called for the HHS OIG to investigate the events leading to the approval.


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Mississippi is probing another Medicaid contractor over pharmacy benefits

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After getting a $55M payout from Centene, MS is thinking UHC/Optum may also be willing to make financial atonement for PBM gaffes.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.



A member of the Senate Medicaid Committee reviews a Mississippi Division of Medicaid handout that reviews the managed care rule in this 2018 file photo. Mississippi officials recent reached a settlement with managed care provider Centene following an investigation into its billing practices.

Rogelio V. Solis | AP

JACKSON • Mississippi announced a $55 million settlement with its largest Medicaid contractor, Centene, last week related to allegations it was overcharging taxpayers for prescription drugs, but state authorities say they are not finished scrutinizing pharmacy benefit management practices at other companies that are paid with public money.

State Auditor Shad White told the Daily Journal last week that his office has been probing another Medicaid contractor, UnitedHealthcare, and its subsidiary, OptumRx, over pharmacy benefits. He declined to provide more details.

From 2016 to 2020, Mississippi’s Medicaid program paid $916 million for pharmacy benefit management services provided by OptumRx, according to agency data. OptumRx, a subsidiary of UnitedHealth Group, the fifth-largest company in the U.S., did not respond to a Daily Journal request for comment.

UnitedHealth and its PBM subsidiary are also facing investigations in other states, according to a recent report by The Wall Street Journal. And Ohio sued OptumRx in 2019, alleging the company bilked that state’s workers’ compensation program out of millions of dollars worth of generic drug discounts.

Meanwhile, the investigation into Centene and its subsidiary Envolve Pharmacy Solutions may be over after the recent settlement, but the mega corporation is apparently not finished doing business with the state. A Division of Medicaid spokesman said earlier this month the agency will exercise an optional one-year contract extension with Centene’s subsidiary Magnolia Health, as well as the state’s other two managed care providers, including UnitedHealthcare. New five-year managed contracts will be bid out by the state and begin next summer.

The three companies provide health insurance benefits for about 485,000 poor adults and children, disabled people, pregnant women, and others. They employ the pharmacy benefit managers as subcontractors to manage drug benefits, negotiate drug prices and reimburse pharmacists.

In the $55.5 million settlement agreement drawn up between Centene and Mississippi — in which Centene did not admit fault — the state had to acknowledge “Centene’s good faith and responsible corporate citizenship” by agreeing to settle. And it agreed that the company and its subsidiaries “have provided high quality pharmacy benefit services to the State and are qualified to continue to provide such services.”

Centene acknowledged it has an “obligation to comply with the requirements of Mississippi’s laws” as it delivers benefits for Medicaid patients going forward, and that the company will “provide full transparency” around its pharmacy benefit claims. Centene is set to pay the state in two installments, with some of the money going to attorney’s fees and the rest to compensate the Division of Medicaid.

Centene also will pay Ohio $88 million to settle a lawsuit alleging the company had inflated its pharmacy costs to the state in order to pad its profits. On top of the settlements with Mississippi and Ohio, the company has set aside another $1.1 billion for payments to 20 additional “affected states,” according to a U.S. Securities and Exchange Commission filing. It is negotiating with a pair of law firms that includes Ridgeland-based Liston & Deas to settle those states’ claims.

But neither Centene nor Mississippi officials have yet gone into detail about specific findings from the investigations into the company, including how much Centene may have cost taxpayers overall. White said the key finding from Mississippi — which was different than Ohio — was that Centene’s PBM had been billing the state for drugs at a higher price than its contract with the Division of Medicaid allowed.

Centene’s top executive only described the allegations in vague terms during a Wednesday call with shareholders, according to an Ohio Capital Journal report.

“The agreement addresses a situation from 2017 to 2018,” Michael Neidorff, the chairman, president and CEO of Centene, said of the settlement deals. “The policies and practices that created the situation were changed in 2019, making the matter very much a thing of the past. With this agreement, Centene will be able to put the situation behind us in a timely manner.”

Centene is the largest Medicaid managed care firm in the country, and the 24th-largest company overall. It brought in $111 billion in revenue last year. And this year, according to its Wednesday investor presentation, it expects to bring in more than $120 billion.

Rep. Becky Currie, R-Brookhaven, a nurse who serves on the House Medicaid Committee, said the state’s $55 million settlement with Centene is “ridiculous” and a “slap on the wrist, with nothing else happening to them, and a possible new contract.”

Currie, who has long raised concerns about the state’s Medicaid managed care system, said she was also disappointed that Centene did not admit fault in the deal.

“If I stole $55 million, how am I not at fault?” Currie asked. “If Becky Currie stole $55 million, I would be in jail. Somebody would (be).”

Currie said she doesn’t believe it’s smart for the state to extend Centene for another year, despite the company’s assurances of reform since 2017 and 2018.

She said she recently sent a letter to Gov. Tate Reeves and other state leaders urging them to take a careful approach as they bid out the next five-year managed care contracts. State officials, she said, need to provide more active oversight of the managed care firms.

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Medicaid Spending on Hemophilia Therapies in US Tripled in 2005-19

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Medicaid Spending on hemophilia drugs is now at $1.7B per year, driven by the use of extended half-life therapies started in 2015.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.




Spending on treatments for hemophilia by Medicaid, a U.S. government health insurance program for select groups, more than tripled from 2005 to 2019, an analysis reported.

Its researchers expect this finding will help state agencies with decisions regarding treatment coverage based on their Medicaid budget, given that the program “provides insurance coverage for approximately half of all US patients with hemophilia,” they wrote.

Results from this analysis were described in the research letter “Trends in the Use of Conventional and New Pharmaceuticals for Hemophilia Treatments Among Medicaid Enrollees, 2005-2020,” published in the journal JAMA Network Open.

Hemophilia is caused by mutations that lead to the lack of functional blood clotting proteins — factor VIII (FVIII) in type A, and factor IX (FIX) in type B. One of its standard treatments is replacement therapy, which involves administering a version of the missing clotting protein to patients. Bypassing agents, which can circumvent the need for clotting factor treatment, are another common therapy.

In recent decades, there have been substantial advances in how hemophilia is treated. Starting in 2014, extended half-life products, which are replacement therapies modified to last longer and so require less frequent dosing, became available. Hemlibra (emicizumab), an antibody-based treatment for hemophilia A, was also approved in 2018.

While these therapies have improved hemophilia care, they come at a high cost. According to the U.S.-based research team that authored this study, hemophilia is now “one of the most expensive medical conditions to manage.”

These researchers performed an analysis of Medicaid spending on hemophilia products in the U.S. from 2005 to 2020. Medicaid provides free or low-cost health coverage to qualifying low-income individuals, families and children, pregnant women, the elderly, and people with certain disabilities.

Findings showed a steady increase in the use of standard half-life replacement therapies prior to 2015. Then, after extended half-life products became available, the use of these standard therapies dropped substantially — by 66% for FVIII and by 57% for FIX. The use of bypassing agents also decreased by 69% from 2017 to 2019.

In 2005, Medicaid spending on hemophilia treatments totaled $521 million. By 2019, spending had more than tripled, to $1.57 billion.

Between these years, spending on FVIII products more than doubled (from $330 million in 2005 to $779 million in 2019), and spending on FIX products more than quadrupled (from $52 million in 2005 to $238 million in 2019).

“The transition of factors VIII and IX from plasma-derived to recombinant pharmaceuticals, the transition from [standard to extended half-life] pharmaceuticals, and the use of bypassing agents and emicizumab have contributed to the transformation of hemophilia from a disease of significant morbidity to a condition that allows affected individuals to lead active lives,” the researchers wrote. “However, these advances have increased costs substantially.”

As of 2019, FVIII products accounted for 50% of all Medicaid spending on hemophilia treatments. FIX products accounted for 15%, bypassing agents for 17%, and Hemlibra for 19% of total spending.

Researchers noted these findings may be useful for states determining their Medicaid budgets. According to the investigators, these findings are particularly relevant since gene therapies for hemophilia are expected to become available in the near future, and state agencies will have to make coverage decisions.

Gene therapies work to deliver a non-mutated version of the defective gene to patients’ cells, thereby restoring the production of the functional clotting factor they are missing.

“These gene therapies, which will cost between $2 to $3 million per patient, have the potential to decrease requirements for factor replacement dramatically,” the researchers wrote.

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CMS Proposes Delays to Major Regulations Affecting Medicaid Rebates

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CMS is delaying rollout of value based rx arrangement to give itself and states more time to implement required data collection systems.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


On May 28, 2021, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule to delay the effective dates of two amendments to the Medicaid Drug Rebate Program (MDRP) related to manufacturer reporting of multiple best prices for drugs when offered as part of a value-based purchasing (VBP) arrangement and inclusion of U.S. territories in the MDRP. CMS is requesting public comment on the proposed effective date delays by June 28, 2021.

Delay of Effective Date for Reporting Multiple Best Prices for VBP Arrangements

CMS proposes to delay for six months the January 1, 2022 effective date for the provisions addressing manufacturer reporting of multiple best prices connected to a VBP arrangement. CMS’ primary stated reason for the proposed delay is to provide more time for CMS, states, and manufacturers to make the complex system changes necessary to implement the new best price and VBP program and assure patient access and quality of care, given the current need to devote resources to the public health emergency (PHE) relating to COVID-19 and the significant expansion of Medicaid under the American Rescue Plan Act of 2021 (ARP).

In proposing this delay, CMS acknowledges that it needs more time to ensure that its own technology infrastructure will be ready to receive multiple best prices related to VBP arrangements. CMS is developing a new Medicaid Drug Program (MDP) system to replace its current system but does not believe it will be ready by January 1, 2022 to operationalize the VBP program.

In addition, CMS stated that State Medicaid agencies need more time to develop capabilities and build an infrastructure that will be able to implement VBP arrangements. Specifically, State Medicaid agencies must develop and implement systems and methods to track beneficiaries and their outcomes, retrieve and evaluate the patient-specific outcomes data, and secure the cooperation of providers and beneficiaries to enter into some of the more complex outcome-based arrangements offered by pharmaceutical manufacturers. CMS stated, without citing evidence, that a reason for the delay was that manufacturer resources were likely diverted away from the implementation of VBP arrangements due to researching, producing, and distributing COVID-19 drugs and vaccines. Some stakeholders were puzzled by this explanation, however, as VBP arrangements continue to be actively pursued, and no manufacturer has publicly called for a delay in implementation of this provision.

Accordingly, CMS believes that July 1, 2022 is a more realistic target date for implementation of the VBP multiple best price program. CMS also stated that it expects to issue additional guidance before July 1, 2022 on operational and policy aspects of the new VBP program, including specifications relating to beneficiary protections.

Delay of Inclusion Date for U.S. Territories in the MDRP

CMS also proposes to delay the April 1, 2022 effective date of inclusion for U.S. territories (American Samoa, Northern Mariana Islands, Guam, Puerto Rico, and the Virgin Islands) in the definitions of “States” and “United States” for purposes of the MDRP to April 1, 2024. However, if public comments indicate readiness to include territories in the MDRP, CMS proposes to finalize an inclusion date that may be earlier than April 1, 2024, but not before January 1, 2023.

The MDRP regulatory definitions of “States” and “United States” were originally amended to include the U.S. territories by the Covered Outpatient Drug Final Rule (February 1, 2016), with a delayed inclusion date of April 1, 2017. Subsequently, CMS issued two interim final rules to further delay the inclusion date for the U.S. territories in the regulatory definitions of ”States” and ”United States” to April 1, 2022 based on discussions with the territories on preparedness to join the MDRP and concerns related to manufacturers potentially increasing drug prices to avoid setting new Medicaid best prices.

CMS is again proposing to delay the inclusion date of U.S. territories in the MDRP for substantially the same reasons, namely that territory resources should prioritize demands arising from the PHE and expansion of Medicaid under ARP to address beneficiary needs during COVID-19.


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PhRMA files federal lawsuit to get rid of controversial Medicaid drug rebate rule

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A pharma industry association is asking a judge to not include copay assistance to patients in the “best price” calculation used in Medicaid rebate programs.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.



Drugmakers are going to court to overturn a rule that requires them to include copay assistance into Medicaid drug rebate amounts. (zimmytws/GettyImages)

The pharmaceutical industry wants a federal judge to ditch a controversial rule that requires drugmakers to factor copay assistance and discounts into rebates offered to Medicaid.

The Pharmaceutical Research and Manufacturers of America (PhRMA), a top pharma lobbying group, sued the Department of Health and Human Services in the U.S. District Court for the District of Columbia on May 21 over the rule finalized back in December 2020. The lawsuit claims that the rule directly contradicts federal law surrounding Medicaid rebates.

“CMS’ final rule contradicts the plain text of the Medicaid rebate statute by improperly requiring manufacturers to treat financial assistance that they provide to patients to help defray their co-pays and other out-of-pocket costs as part of the ‘price’ a manufacturer offers to commercial insurers,” the lawsuit said.

If the lawsuit is successful, it will roll back an effort by the Trump administration to target assistance such as copay cards that the agency has said does not fully help patients. The rule does not go into effect until Jan. 1, 2023.

The rule touched on a major battle between insurers and pharmacy benefit managers (PBMs) and the drug industry.

Drugmakers that want Medicaid coverage of their products must agree to provide those drugs at the same costs as those given to commercial purchasers. Manufacturers agree to pay rebates to the states to make up the difference.

RELATED: MACPAC calls for Congress to eliminate the drug rebate cap

The program requires manufacturers to report to states the “best price” of a drug that is calculated based on the lowest price available to a wholesaler, retailer or provider and the average manufacturer sales price, which is the average price paid to wholesalers and retail pharmacies. The rebate for brand-name drugs is based on the difference between the best price and average manufacturer price for a product. A generic drug rebate is based on 13% of an average manufacturer price.

But the rule now makes clear that copay assistance cards and other cost-sharing assistance offered by the drugmaker must be counted in the best price calculation.

“This change will help ensure that when patients use a copayment assistance card provided by a drug manufacturer, the value is passed through to the patient’s deductible or cost-sharing obligation in full, as opposed to offsetting what the health insurance company would have to normally reimburse the pharmacy,” according to a CMS press release from December on the final rule.

The rule also comes as insurers and PBMs have adopted copay accumulator programs that limit the impact of a manufacturer’s assistance on a patient’s deductible or out-of-pocket cost limit.

The pharmaceutical industry argues the accumulator programs seek to undermine patient assistance tools, while the PBM industry counters the programs could cause patients to choose more expensive drugs over cheaper options and increase healthcare costs for employers.

RELATED: Insurers worry drug companies could game changes to Medicaid rebate program in new rule

PhRMA argued in the legal filing that the rule directly contradicts the best price text in the Medicaid rebate program’s statute.

The law defines the best price as the lowest price made available to any “wholesaler, retailer, provider, health maintenance organization, nonprofit entity or governmental entity within the United States.”

But drugmaker assistance is not part of the price available to any of those purchasers, PhRMA argued.

“Manufacturer assistance to patients is not part of the ‘price’ available from the manufacturer to any best-price-eligible purchaser, with or without an accumulator adjustment program,” the lawsuit said. “Accumulator adjustment programs deploy only after a drug has been paid for and dispensed and diverts the assistance that the manufacturer provided to the patient, against the manufacturer’s will and often without its knowledge.”

The Centers for Medicare & Medicaid Services did not immediately return a request for comment on the lawsuit.

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What are the key differences between Medicaid and other payer spaces from a pharmaceutical manufacturer perspective?

Many of our clients are pharmaceutical industry professionals working to increase access for Medicaid members to drugs, devices and therapies. These clients include manufacturers, PBMs and other organization types. The article below is based on our experience working with professionals who have successfully navigated this space. Concepts have been simplified for clarity.

Reading time: 7 minutes

Intended Reader: Pharmaceutical manufacturer sales executives and marketing teams

Key Topics: The state by state nature of Medicaid programs, How PBMs are different in Medicaid, Variation across P&T committees

  The State-by-state Nature of Medicaid Programs

If you’ve seen one Medicaid program, you’ve seen one Medicaid program.

One of the first differences pharmaceutical professionals notice is the uniqueness of each state Medicaid program. While there are national dynamics in play with some of the larger rebate programs, each state has a large degree of control over its coverage and reimbursement policies.  

The main variables for a given state market include:

  1. Fee-for-Service– How does the state handle drug coverage for members who are not in a managed care plan? Are some drugs covered under FFS but others are not?
  2. Managed Care– What responsibility and authority do health plans operating in the state have for pharmacy benefits? For plans that are part of national brands, how centralized are those decisions?
  3. Collaborative Care Models– In recent years, some states have implemented these models. In these models, benefit decisions are often made by a board. Examples include CCOs in CO and WA.

State laws and regulations– Each state will have a different set of regulations on how coverage decisions are made, benefit categories products will be assigned to, and how marketing and communications can be done for members about pharmaceutical benefits.

Use of Pharmacy Benefit Managers  in the HHS Space

The role of PBMs in Medicaid is different

While pharmacy benefit managers (PBMs) are not unique to the Medicaid payer space, recent trends have shown the importance of understanding the impact the state government context has on PBM activities.

There are 3 key considerations for manufacturers evaluating the role of PBMs in Medicaid:

  1. The PBMs goal of conserving public funds– Since Medicaid is funded with both federal and state tax dollars, spending on pharmacy has a high degree of visibility. This is most apparent during the annual budget process in a given state. There is generally more scrutiny on PBM activities in the Medicaid space because of the ongoing need to show cost savings with public funds.
  2. The expanded scope of PBMs in the Medicaid space– Compared to PBMs in other payer spaces, Medicaid PBMs often take on extensive program management scope, including clinical drug reviews for states to inform decision-making (i.e., states outsourcing some P&T-type functions to PBMs).  Medicaid PBMs also negotiate Medicaid supplemental rebates.
  3. Recent concerns around transparency – While states have increased reliance on PBM services in recent years, there has also been some scale-back in certain state markets. This retraction is largely over spread pricing issues. There is a renewed call for transparency in PBM operations, and a new political focus on contracts.

Variation in  Structure and Operation of P&T Committees 

There are some similarities across states, but P&T operations vary widely

Federal law requires each state to have a P&T committee if the state wants to operate a Preferred Drug List (PDL). Each state must include physicians and pharmacists on the committee- but beyond this general requirement, each state can set its own procedures and schedules for the activities and decisions of the committee.

While states must cover any drugs on the federal Medicaid rebate program, coverage for other drugs is up to each state (or health plan if the state has delegated this to managed care). There has been a trend towards adopting more uniform PDLs for specific drug classes (in 2018, 14 state Medicaid programs had a uniform PDL)[1]. Some states have also moved towards streamlining medical neccessity criteria with uniform clinical protocols.[2]

While these trends toward standardization have been observed, wide variation by states is the norm.

Some states require utilization controls (such as prior authorization) for all new drugs before a P&T committee develops specific rules. Some states have rapid evaluation processes, but others have extensive protocols that can include pilots, meta-analyses and extensive expert review. These processes range from three months to one year for consideration of new drugs or newer / improved coverage for an existing drug. Like all things government, there is a political nature to the coverage and pricing in many Medicaid pharmacy programs that needs to be taken into account when addressing market access issues in a given state. In many states, the level of influence that the independent pharmacists association exerts can be the difference between coverage, or limited coverage with extensive controls. The role of advocacy organizations whose populations are impacted by your product is also often significant.

How You Can Address the Challenges and Complexities of the State Medicaid Pharmaceutical Environment

Besides your own research into this topic, there are a few key tactics that can help you overcome some of the common challenges related to improving market access in Medicaid markets. We assist clients with each of these strategies, and are happy to have a conversation anytime. If our services and expertise are a fit for your needs as you develop or execute your strategy, engaging with us is a simple process. If we are not the right fit, we are happy to make a referral to another firm who may be.

  1. Train your account teams on the details of each state Medicaid program they call on. Knowing the fundamentals of each state program is critical. Most teams used to the commercial space are initially unaware of this need in Medicaid, and then quickly become overwhelmed by the learning curve.
  2. Ensure your sales decks and messaging are aligned with the unique values and priorities in the Medicaid payer space. Telling the right story to a Medicaid audience is completely different than the normal narrative for commercial and Medicare Advantage audiences. Your sales collateral needs to account for the unique needs and perspectives of Medicaid program decision makers.  
  3. Evaluate what your traditional government affairs approach can and cannot do to help in the Medicaid space. Many manufacturers have a government affairs presence in multiple states. However, traditional government affairs approaches are often insufficient because of the complexity of players, advocates, and the economics of Medicaid financing.
  4. Set realistic expectations of timelines in your sales planning– Increasing access for a drug in the Medicaid space can take years. While the volume of members in the Medicaid space can drive significant revenues, there is usually a significant time investment, sometimes multiple years, before favorable coverage policies are fully realized. If you do not set appropriate expectations internally, you will create disruption and confusion in your sales organization.

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