April 18, 2011

(Washington, DC) — A recent study shows that Indiana could save $214 million over the next decade by updating its Medicaid pharmacy program to operate more like those in Medicare and the commercial market. This year, Governors Chris Christie (R-NJ), Rick Perry (R-TX), and Andrew Cuomo (D-NY) have taken this path to reduce prescription drug spending in their own Medicaid programs, said the Pharmaceutical Care Management Association (PCMA).

“Changing the preferred drug list (PDL) is only one piece of the puzzle and does nothing to address the twin cost-drivers of drugstore overpayments and underuse of generics. Medicare, private insurers and other state Medicaid programs pay far less than Indiana because they’ve moved beyond fee-for-service and adopted advanced strategies to end pharmacy overpayments and increase the use of generics,” said PCMA President and CEO Mark Merritt.

In Indiana’s fee-for -service approach, state officials – not market forces – set pharmacy payment levels and are under constant political pressure from independent drugstores to set rates artificially high. Medicare Part D plans, employers and unions avoid this trap by having independent, third-party pharmacy benefit experts negotiate market rates directly with drugstores. These plans also apply cutting-edge, market-proven strategies to increase the use of generics.

The result is that private insurers and Medicare Part D pay drugstores less than half what Indiana’s Medicaid program pays, while also using more generic medications. Recent polling finds voters would rather modernize Medicaid pharmacy than cut benefits for patients or payments to doctors and hospitals.