Pennsylvania says changes to Medicaid program will yield $85 million in savings

Pennsylvania regulators have big change planned for the state’s Medicaid program, which provides health and other benefits for 2.8 million people.

Starting Jan. 1, the Department of Human Services will require the eight companies that manage pharmacy benefits under Medicaid in the state to use the same preferred prescription drug list, instead of eight individual lists.

The department estimated that the change in Medical Assistance (Pennsylvania’s name for Medicaid, which is a joint state and federal program) will save the state $85 million a year — with much of the money coming out of the pockets of the managed-care companies, provide more consistency for beneficiaries, and ease the burden on doctors.

The eight companies — loosely organized as the Pennsylvania Coalition of Medical Assistance MCOs — had already released their own analysis in May with a diametrically different conclusion: The proposed change to the statewide drug list would cost the state $81 million more in the first year and make life harder for doctors.

Pennsylvania’s Medicaid prescription-drug spending totaled $1.5 billion in the year ended Sept. 30, 2017, that MCOs’ report said. That figure is after rebates and does not include the federal share.

What’s not clear is the effect on consumers, how many will have to change medications. A spokesperson for the Human Services Department said each of the managed-care companies is in the process of calculating those numbers.

Laval Miller-Wilson, executive director of the Pennsylvania Health Law Project, a nonprofit advocacy group, said he has urged the state to require 60-day notice of the change for Medicaid beneficiaries. That would have to happen by the end of this month.

“I’ve also asked the state to require plans that have seniors with five or more medications to make sure that those plans are reaching out to those members, especially people with certain kinds of chronic conditions,” Miller-Wilson said. “They probably need a little more touch than just a letter in the mail. Call them up and ask if they are having trouble getting to their geriatrician or cardiologist.”

The change has not been on the radar of health clinics that serve large numbers of Medicaid patients, but one chief medical officer said doctors are used to drug lists, or formularies, changing every January anyway.

“If they went to a single formulary, it actually in some ways would be easier for providers to care for their patients because instead of having 10 different, five different, three different formulary changes every year, there would just be a single one,” said Julia DeJoseph, chief medical officer at Delaware Valley Community Health, which has eight clinics.

The main financial driver for the switch to a unified drug list was the well-publicized high cost of individual drugs, such as the thousands spent to treat hepatitis C.

Rather, the report commissioned by the Human Services Department said, the change would allow the state to take full advantage of federal Medicaid drug rebates.

“Manufacturers are required to pay an additional rebate if they increase their drug prices faster than the rate of inflation. Because of the rapid increase in drug prices and relatively low inflation, this has resulted in federal rebates of 100% for many drugs,” the report released in late September said.

Managed-care companies are not eligible for the federal rebates, the report said.

Here’s how the math works, according to the Human Services Department: The managed-care companies will spend $21 million more on drugs and will lose $155 million in rebates, but will be offset by more than $261 million in rebates paid directly to the state. The result is $85 million in savings for the state.

Under the plan, the managed-care companies, which typically operate on narrow margins, will face a financial penalty if they don’t stick close enough to the drugs on the state’s list.

Beyond their report from May, managed-care companies, including the largest in the Philadelphia area, have not had much to say publicly about the change.

Health Partners Plans Inc., which covers 235,619 Medicaid beneficiaries, on Tuesday did not respond to a request for comment.

AmeriHealth Caritas, a unit of Independence Health Group and the state’s largest manager of Medicaid benefits, with 715,477 beneficiaries in the physical health program and more covered for long-term services, said: “We understand that DHS has decided to implement a [preferred drug list] in Pennsylvania, and will work with stakeholders as this moves forward.”