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Not a Generic Medicaid Director

By: Steve Barnes
New York Times, January 13, 2002

LITTLE ROCK, Ark. -- Ray Hanley, director of the Medicaid program in Arkansas, went to the doctor's office recently for a blood pressure check. It went up even before he saw his physician.

"In the waiting room was a golf magazine with Tiger Woods on the cover, and glued over his driver was a sticker that said the magazine had been provided courtesy of Pfizer and to ask your doctor about Viagra," Mr. Hanley recalled.

"Then I went to the men's room, and atop the toilet tank was a little billboard, about two feet high, telling me that if I ever felt anxious I should talk to my doctor about taking Paxil.

"Well, knowing that Medicaid is paying for a lot of those drugs, the ads were enough to give me a good case of anxiety," he said.

It is Mr. Hanley, however, who is helping to make the pharmaceutical companies anxious. He is a leader in an increasingly vocal and organized campaign by state Medicaid officials around the country to reduce the cost of prescription drugs covered by Medicaid, the government-financed program that provides health care to the poor.

Mr. Hanley has urged doctors to prescribe generics instead of more expensive name brands promoted by drug industry sales forces. He maintains an e-mail network that lets him communicate prices and other information quickly to Medicaid directors in every state. He has used the combined purchasing power of Arkansas and other states to press drug companies for more generous deals.

A career civil servant who started as an Arkansas welfare case worker in 1974, Mr. Hanley, 50, is the longest-running Medicaid director in the country, appointed in 1986 when Bill Clinton was governor. Mr. Hanley admitted that his style was tough, but, he said, "You have to be."

At the doctor's office that day, Mr. Hanley acknowledged, he walked out with the golf magazine cover and the toilet-tank promotional ad. He converted them to slides for presentations to state legislators and Medicaid colleagues around the country, aimed at showing that drug companies use slick consumer ads to promote new drugs and raise prices.

"It infuriates me," he said. "These drug companies spend hundreds and hundreds of millions of dollars to advertise these drugs. Doctors say patients come in and demand what they saw on TV. In the end, too, many doctors say, `Well, insurance will cover it; we'll write it.' "

The anger of state officials like Mr. Hanley has contributed to a backlash against the cost of prescription drugs and has reverberated into the boardrooms of big pharmaceutical companies, which are facing an array of challenges to their profit and revenue growth. Congressional investigators, who are examining the pricing practices of big drug companies in Medicaid and Medicare programs, subpoenaed the chief executive of Pfizer early this month after the company refused to provide information.

Mr. Hanley's zeal in trying to cut Medicaid costs has made him something of a legend among other Medicaid directors and given drug companies reason to watch what he does.

"Ray likes to think outside the box," said Linda K. Wertz, the Medicaid director in Texas and president of the National Association of State Medicaid Directors. "He likes to stir the pot, and he's willing to go toe to toe."

Leo Hauser, a government relations executive at Pfizer, said, "Ray takes a global view of how the whole system works, as opposed to trying to fix everything by tweaking only one part."

Some critics say Mr. Hanley goes too far. He recently tried to balance his budget by cutting services to children, setting off protests by parents and health care providers. He responded by saying that the state could not afford the services. His proposals, he said, would ensure their survival but at a higher cost to the recipients.

"Sometimes he seems a bit pulled away from the people he's trying to help," said Shane Broadway, speaker of the Arkansas House of Representatives. Nonetheless, Mr. Broadway conceded that Mr. Hanley had a difficult job — controlling one of the fastest-growing costs in state budgets everywhere. When Mr. Hanley became Medicaid director in Arkansas, the state's prescription bill was $38 million; in this fiscal year, which ends June 30, it will approach $300 million.

"Ray is the most knowledgeable person in the country about Medicaid, and that includes the people running it in Washington," Mr. Broadway, a Democrat, said.

Mr. Hanley, who has no political party affiliation but calls himself a fiscal and social conservative, is unapologetic about his attitude on costs. "We have only so much money in this budget," he said. "If we can't live within that budget, we have to make cuts. Is that heartless? So be it."

Some of Mr. Hanley's biggest critics are local pharmacists, who fear that he will put many of them out of business. They are concerned about his plan to seek a single wholesale provider for the state's 15,000 Medicaid nursing home patients, whose pharmaceutical bills will cost the state $50 million this fiscal year. Richard Beck, executive vice president of the Arkansas Pharmacists Association, called the plan unworkable. "We'll be fighting him all the way," Mr. Beck said.

 
Mr. Hanley has also angered the largest drug retailers. In 1999, discount giants including Wal-Mart Stores, based in Bentonville, Ark., successfully sued to block his order for deep discounts on commonly prescribed drugs. "It probably wasn't the best idea I've ever had," Mr. Hanley said. "But I pride myself on pushing the envelope."

His networking with Medicaid offices in other states has yielded some results. Last year, when Florida threatened to exclude some drugs from its Medicaid list unless drug makers cut prices, Pfizer agreed to a compromise in which it would spend millions on disease management programs for Florida's Medicaid recipients. Mr. Hanley told the 15 largest drug companies he expected similar cost-saving proposals.

"Some interesting things have come from that," Mr. Hanley said. Schering-Plough, for example, is financing an educational program for asthmatic youth on Medicaid in Arkansas. Eli Lilly is funding a similar service for Medicaid diabetics. And Purdue Pharma L.P. is paying for a $100,000 software program to help the state fight abuse of narcotic drugs by Medicaid patients.