PBM Offers Potential Ways to Improve Medicaid

In-depth look at clinically appropriate drug use and cost-saving opportunities in Medicaid programs.

Magellan Rx Management, a pharmacy benefit manager, has released a Medicaid Trend Report that outlines different opportunities for states to improve their Medicaid programs.

The analysis included data from the fee-for-service Medicaid pharmacy programs for 25 states and Washington, DC, in which Magellan Rx Management manages pharmacy benefits.

“Our report takes a retrospective look at data from the FFS programs we administered from 2014 through 2015, and identifies the tools and practices that enabled state Medicaid programs to manage the increase in net cost per claim to 3% year-over-year,” said Doug Brown, vice president of pharmacy pricing and value-based solutions. “Importantly, our report also takes a prospective look and outlines several strategies that we believe states should consider implementing to optimize patient health and cost savings.”

In the analysis, investigators found that the net cost per claim increased $1.26 (3%)from 2014 to 2015 while the gross cost per claim was $9.17 (10.7%). This small increase in net cost per claim was likely due to cost-controlling strategies implemented by pharmacy benefit managers.

A highly criticized cost-controlling method is the creation of formulary exclusion lists. These company formularies are scrutinized because critics say it can affect patients who need a medication that is not covered. However, a recent study found that the formulary exclusion lists do exactly what they claim to, which is lower costs without impacting patient access.

Other cost-controlling methods, such as utilization management, clinical criteria, and brand-over-generic opportunities, also avoided accelerating drug trends in the Medicaid population, according to Magellan. Additionally, federal and supplemental rebates were able to drive down the net cost of pharmacy spending.

State laws that prohibit or limit the state’s ability to manage high-touch classes, and other factors that cannot be controlled through preferred drug lists, were seen to impact the cost efficacy of the Medicaid pharmacy program, according to the analysis.

“By collaborating with our state Medicaid FFS client base, Magellan Rx Management has been able to show that leveraging clinical and financial strategies can result in real, demonstrable cost savings in FFS programs, while ensuring exceptional efficacy-based care for individuals,” Brown said.

To increase Medicaid pharmacy savings, Magellan suggests that states review the preferred drug list restrictions of certain classes, and be complimented by clinical criteria. Decisions about the inclusion of certain drugs should be considered at the net cost level and not the gross cost level, according to the study.

Magellan said that federal and supplemental rebates should also be taken into account. They added that new methods of cost control should be implemented, such as supplemental rebate negotiation, and evaluation and net cost monitoring.

Supplemental rebate negotiation and evaluation has saved more than $1.3 billion from 2014 to 2015, making it an excellent cost-controlling method. Choosing generics over brands also saved $86 million in the fourth quarter of 2015, according to the analysis.

“Medicaid pharmacy program administrators are consistently looking for ways to improve care while judiciously appropriating taxpayer funds, in an area where spend is driven by many outside factors,” said Brown concluded. “Magellan Rx Management has an extensive history managing Medicaid pharmacy programs, and as a full-service PBM, we also understand the full-spectrum of pharmacy spend, including specialty drugs where spend is rapidly accelerating. Information in this report is useful in understanding current market trends, as well as potential areas of focus for states going forward.”