Unsustainable Drug Prices or Access to Medicaid: Pick One

The staggering cost to Medicaid programs for covering the first hepatitis C treatment a few years ago, which came close to six figures per treatment, may seem like a walk in the park compared to much more expensive therapies for rare diseases soon to be available.

Drug manufacturer Novartis, for instance, has received Food and Drug Administration approval for Zolgensma, a gene therapy for infant patients with a fatal spinal atrophy condition.  The drug is expected to be priced at $2.1 million.

Nobody can debate the value of these medical interventions and the tremendous cost involved in discovering, testing and, ultimately, bringing them to market. Nor can we debate whether Medicaid should cover them. Of course it should.

But something has to give. Pharmacy costs are outstripping all other costs for Medicaid programs across the nation, and that undermines the coverage and benefits provided by Medicaid to people who depend on the program for their health care.

Take the case of MassHealth, the Medicaid program in Massachusetts. Pharmacy spending has nearly doubled in half a decade. The state spent $1.1 billion on prescription drug spending in 2012 and $1.9 billion in 2017.

The dramatic growth in pharmacy costs is unsustainable, particularly when factoring in breakthrough medications that have no competition and therefore nothing restraining the price.

The administration of Massachusetts Gov. Charlie Baker (R) first tried to get a federal waiver that would allow it to create a Medicaid drug formulary. The state committed itself to covering every drug class but sought to pick and choose which products in each class it would reimburse.  The waiver request was denied by the Trump administration, which seeks to move in the direction of block grants to fund the federal share of Medicaid, getting out of the business of granting waivers.

The Baker administration is now seeking state legislative authority to negotiate with pharmaceutical companies the drug prices paid by MassHealth. If it is unable to achieve reductions in cost, the state proposes a rate-setting process that will establish target values for medications.  

To some, particularly those in the pharmaceutical industry, these steps seem draconian, anti-competitive and unfair. It is important, though, to look at the issue from all sides.

Massachusetts, unlike many other states, has not tightened eligibility requirements on its Medicaid program, nor has it put in place onerous restrictions such as work requirements.  Access to MassHealth, in fact, is seen as central to the state’s first-in-the-nation health reform law, on which the federal Affordable Care Act was modeled.

MassHealth is equally committed to medication access, which is why it always covered the hepatitis C drugs, even before there was competition and when costs were at their highest.  Negotiating drug prices will not harm members, and it will not impact access.

The state has tried every lever possible to lower MassHealth costs — pegged this fiscal year at $16.6 billion — like wringing droplets of water from a sponge. There is nothing left without addressing drug prices.  

Moreover, the state sets rates for every other provider of services. None of those providers set their own rates and are paid that amount.

We have drawn a line in Massachusetts that we are not going to restrain access to MassHealth.  We are not going to create obstacles to coverage (such as work requirements) that create lots of churn as people come on and off Medicaid coverage and ultimately harm the health of people who need that safety net. That is one reason the state leads the nation in the rate of uninsured, at under 3 percent.

The very viability of access to Medicaid is jeopardized by rapidly increasing drug prices.  MassHealth should have the leeway to negotiate those prices with the industry.


Gerard A. Vitti is the founder and CEO of Healthcare Financial Inc., a company that assists individuals in obtaining health care benefits.

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