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State takes steps to control Medicaid drug spending

By: Deborah Yetter
The Courier-Journal, October 2, 2001

Emergency rules limit the use of costly, brand-name prescriptions

FRANKFORT, Ky. -- State Medicaid officials announced sweeping changes yesterday aimed at reducing soaring prescription drug expenditures -- emergency measures they expect to help reduce a $163 million shortfall in the program.

Using the state's power to enact emergency regulations, the Health Services Cabinet by Dec. 1 will curb the use of the most costly, brand-name drugs when cheaper or generic drugs are available. It will reinstate a system requiring doctors to get approval from Medicaid -- the federal-state health program for the poor -- before prescribing the more expensive or newer drugs.

Kathy Kustra, a special adviser to Gov. Paul Patton on Medicaid, said officials will ask lawmakers in January to make the temporary changes permanent by enacting them into law.

Kustra said officials don't know yet how much they will save through the changes but expect the savings to be considerable. She said officials expect to have savings estimates in the coming weeks.

The measures, announced yesterday before an advisory board that oversees prescription drugs for Medicaid, would help the state bypass two state laws that officials say have stripped them of power to control prescription-drug spending.

The changes brought an unusual burst of applause from members of the drug review committee, whose members said they have been frustrated by legislation they say removed their power to control drug expenditures. Dr. Robert Hughes, a Murray physician who is chairman of the advisory board, said the bills passed in 1998 and 2000 have been a windfall to the pharmaceutical industry.

''Hopefully, there won't be any opposition to this, because it's the right thing to do,'' said Hughes, who described the proposed measures as a ''home run'' for Medicaid recipients and taxpayers.

The measures got a more cautious reaction from several pharmaceutical company representatives who attended yesterday's meeting.

Ronnie Coleman, a lobbyist for Johnson & Johnson, said he isn't sure his company would oppose such changes but thinks the state should look for cost savings in other areas, such as people who overuse the system.

Still, he said, the industry may be able to work with the state when lawmakers meet in January. ''I think maybe we'll be able to come to some kind of agreement,'' he said.

Marie Cull, a lobbyist for Pharma, the pharmaceutical trade group, said she hadn't had a chance to discuss the changes with Pharma officials and couldn't comment. But she said it clearly shows the state had some room to maneuver within laws officials had claimed tied their hands.

Kustra said Medicaid officials, by reviewing regulations developed after the laws were passed, determined they had some flexibility to draft emergency regulations -- temporarily replacing the old regulations -- that allowed them to reinstate controls on prescription drugs.

The 1998 bill, Senate Bill 351, required Medicaid to make all new drugs available without restriction during their first 12 months on the market, typically the period when medications are most expensive. In 2000, House Bill 608 further loosened restrictions by requiring Medicaid to make all similar drugs available without restrictions when a new drug comes on the market.

As a result, Medicaid officials and lawmakers have said, pharmaceutical expenditures have skyrocketed since 1998, making it the fastest growing item in the budget for the government health plan for the poor, disabled and those in nursing homes.

Pharmaceutical spending rose from $433 million a year ago to $568 million in the fiscal year that ended June 30 -- an increase of 31 percent. That followed a 24 percent increase the previous year. Those figures don't count Medicaid recipients in Jefferson County and 15 surrounding counties who are served through a unique, managed-care network.

Dr. W. Louis Moore, a physician in the Medicaid department, told the advisory board yesterday that the program will spend more than $600 million for prescription drugs in the current fiscal year unless the state takes steps to control spending.

''It can't continue to escalate,'' he said.

One of the department's first actions under the emergency regulations will be to establish a Pharmaceutical and Therapeutic Advisory Committee of nine physicians and three pharmacists -- all serving Medicaid patients -- to help them review how to restrict expensive drugs. The committee's job will be to re-establish a ''formulary,'' or list of drugs that require prior approval from Medicaid, usually because they are expensive.

The committee will decide whether cheaper or generic drugs are available, and if so, whether they are desirable for patients. If so, the more expensive drugs will have to go through a ''pre-authorization'' process before Medicaid will pay for them.

A physician will have to show a sound medical reason for prescribing the more expensive drug or show that cheaper or generic drugs didn't work -- just as they must do for many private insurance companies, Moore said.

To head off complaints about the preauthorization process -- which used to require a doctor or pharmacist to call Frankfort and wait for a return call -- the state will use a new, streamlined system it borrowed from Passport, the Medicaid managed-care system for the Jefferson County region.

Doctors and pharmacists will fax in the request and get a faxed reply, Moore said. He said Medicaid officials are exploring the use of a computer system to authorize such requests.

State Sen. Daniel Mongiardo, D-Hazard and chairman of a legislative committee that oversees Medicaid, said yesterday that he is glad the state is moving to control pharmacy costs but thinks officials need to look beyond just restricting drugs. Mongiardo, a physician, said he is exploring a computerized, health information-sharing system that would promote education and information among physicians.

State Sen. Julie Rose Denton, R-Prospect, who sponsored the 2000 bill that loosened restrictions on name brand drugs, could not be reached yesterday but has said she would support emergency regulations if they are needed to control Medicaid pharmaceutical spending.