Transcript 2004_SCI_MedicarePartD_reinhart

Michigan Medicaid Pharmacy
Cost Containment
Paul Reinhart, Director
Medical Services Administration
Michigan Department of
Community Health
October 8, 2004
Conclusions
• Preferred drug list program has reduced the
rate of growth in Medicaid pharmaceutical
spending
• Savings will grow as more states join the
new multi-state initiative
• No adverse beneficiary impact
• Medicare pharmacy reform will have both
positive and negative impact on states
2
“Medicaid is the bleeding ulcer
of state government.”
State Rep. Marc Shulman
Detroit News, April 19, 2004
3
Growth in Michigan Medicaid
Vs. Growth in Michigan Revenue
100%
80%
Medicaid
60%
40%
20%
Revenue
0%
-20%
FY95
FY97
FY99
FY01
FY03
FY05
4
Michigan Medicaid Caseload
1,450
1,401,800*
1,400
In Thousands
1,350
1,300
1,250
Previous Record
1,200
1,150
1,100
1,050
1,071,900
1,000
1999
2000
2001
2002
2003
2004
Fiscal Year
*August 2004
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Pharmacy Expenditures
$600,000,000
$500,000,000
$400,000,000
$300,000,000
$200,000,000
$100,000,000
$0
FY00
FY01
FY02
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Michigan Medicaid Pharmacy
Cost Containment
7
Medicaid Fee for Service FY03
Pharmaceutical Spending
All Other
Spending
$6.4 Billion
FFS Pharmacy
$620 Million
8
Medicaid Pharmacy Program
Prior to PDL
Pre-PDL
Preferred Drugs Some Generics
Federal Rebate
Yes
Supplemental
Rebate
Pharmacist
Payments
No
AWP, MAC, etc.
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Medicaid Pharmacy Program
After PDL
Pre-PDL
Post PDL
Preferred Drugs Some Generics
Larger List
Federal Rebate
Yes
Yes
Supplemental
Rebate
Pharmacist
Payments
No
Yes
AWP, MAC, etc. Same
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2002-2003 PDL
• Limited to Michigan
• Pharmacy and Therapeutics Committee
identified clinically necessary drugs in 40
drug classes
• Contractor (First Health) negotiated
supplemental rebates
• Clinically necessary and drugs with
supplemental rebates are not subjected to
prior authorization
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Annual Cost Per Script Increase
FY99 to FY02
Annual
Average
FY03
0%
11.0%
4.2%
5%
10%
15%
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Millions
Estimated Pharmacy Cost
Containment Savings
$800
$700
$600
$500
$400
$300
$200
$100
$0
FY99
FY 00
FY 01
Actual
FY 02
FY 03
FY 04
Trend
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Preferred Drug List Impact on
Beneficiaries
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Prior Authorization Denials
•
•
•
•
•
•
•
14,300,000 claims
106,000 prior authorization requests
39,000 approved by technician
61,000 approved by pharmacist
3,500 approved by state physician
2,500 denied by state physician
1 denial reversed after administrative appeal
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Multi-State Preferred Drug List
Program
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Michigan Multi-State Pooling
Agreement
• Approved by the federal government on
April 22, 2004
• States in the initial pool: Michigan,
Vermont, Nevada, Alaska, New Hampshire
• Hawaii and Minnesota state plan
amendments approved in September
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“Matrix” Bid Theory: More Lives,
More Exclusivity = Lower Cost
 More Exclusivity
More Lives
Lives
<3m
1 of 1
1 of 2
1 of 3
1 of 4
$1.00
$1.10
$1.20
$1.30
3–6m
$.90
$1.00
$1.10
$1.20
6–9m
$.80
$.90
$1.00
$1.10
>9m
$.70
$.80
$.90
$1.00
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Medicare Prescription Drug,
Improvement, and Modernization
Act of 2003
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Impact on Medicaid
• January 1, 2006 federal government
assumes responsibility for processing
claims for dual eligibles
• Dual eligibles account for over 2/3 of our
fee-for-service pharmacy spending
• “Clawback” requires states to pay federal
government for dual eligibles
• Could increase state costs
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State Costs in Millions
“Clawback” Will Increase
Michigan’s Costs
$260
$250
$240
$230
$220
$210
$200
$190
$180
$170
$250
$230
$220
$210
$200
$190
$180
FY03
FY04
FY05
State Operated
FY06
FY07
Federal Clawback
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Other MMA Impacts
•
•
•
•
New state administrative costs
Reduced state pharmacy bargaining power
State pharmacy assistance program savings
State pharmacy assistance coverage
expansion opportunities
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Conclusions
• Preferred drug list program has reduced rate
of growth in Medicaid pharmaceutical
spending
• Savings will grow as more states join the
new multi-state initiative
• No adverse beneficiary impact
• Medicare pharmacy reform will have both
positive and negative impact on states
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