Medicaid panel eyes restrictions on drugs physicians prescribe

The federal effort to pare prescription drug costs could increase the hassle factor and send more patients to overburdened clinics.

By David Glendinning, AMNews staff. Sept. 12, 2005.

Washington -- Lawmakers set on reducing Medicaid spending should take a long, hard look at how the program pays for its drugs, according to a federal advisory commission. But some physicians worry where this look might lead policy-makers.

The panel, which the Dept. of Health and Human Services convened in July, approved a set of recommendations for a September report that outlines about $11 billion in Medicaid reductions over the next five years. The report next goes to Congress, which has pledged to find at least $10 billion in entitlement savings.

The cost of medications will be a prime target if lawmakers choose to follow the commission's strategy. Borrowing from proposals by the Bush administration and the National Governors Assn., the group said the federal government can squeeze billions out of the system by steering beneficiaries toward less expensive medicines and by maximizing the savings available from drug firms.

Federal endorsement of a tiered co-payment option would allow states to increase the amount Medicaid patients would have to pay for a non-preferred drug, saving the government roughly $2 billion over the next half-decade, officials said.

More than $6 billion that otherwise would subsidize drugs would stay in federal coffers if states and Medicaid managed care plans were permitted greater access to drug companies' discounts and rebates, the commission agreed. The greatest single chunk of the five-year savings, $4.3 billion, would come from letting states negotiate drug purchases at the average manufacturer price, which is lower than the average wholesale price.