March 10, 2011
(Washington, DC) — As Florida legislators seek ways to reduce Medicaid spending, they should start by transitioning the entire pharmacy benefits program from the archaic fee-for-service model to the more efficient model used in some parts of the state.
A recent study finds that the program could save $473 million over the next decade by modernizing all of its pharmacy benefits more like those in Medicare and commercial plans. Governors Chris Christie (R-NJ), Rick Perry (R-TX), and Andrew Cuomo (D-NY) have already included similar budget proposals to reduce prescription drug spending in their own states.
“Currently, most of Florida’s Medicaid program uses an archaic approach to drug benefits that uses fewer generic drugs and pays more than Medicare and private insurers for pharmacy benefits,” said Pharmaceutical Care Management Association President and CEO Mark Merritt. “Over the next decade, Florida could save $473 million – without cutting benefits or payments to doctor and hospitals – by modernizing the entire program’s pharmacy benefits.”
Like most state Medicaid programs, Florida pays too much for prescription drug benefits because it uses a fee-for-service approach in which state officials set payment rates and are therefore constantly lobbied to inflate them by special interests. To avoid this trap, nearly every other drug benefit program – like those offered by Medicare, employers and unions – rely upon independent, third party pharmacy benefit experts to negotiate competitive rates with pharmacies. These programs also reduce costs by employing cutting-edge, market-proven strategies to increase the use of generics. Recent polling finds voters would rather modernize Medicaid pharmacy than cut benefits for patients or payments to doctors and hospitals.
Governors Christie, Perry, and Cuomo recently announced their 2012 budgets will include proposals to manage prescription drug benefits more like those in other, more affordable Medicare and private sector programs, with a projected combined savings of $475 million.