December 10, 2010
(Washington, DC)—Voters would rather reduce Medicaid spending by better managing pharmacy benefits rather than cutting benefits for patients or payments to doctors and hospitals, according to a new poll commissioned by the Pharmaceutical Care Management Association (PCMA).
This poll comes on the heels of a new state-by-state economic analysis released by The Lewin Group showing that Medicaid uses fewer generic drugs and pays higher pharmacy costs than other programs. The report also finds that Medicaid pharmacy could save more than $30 billion over the next decade by transitioning from the current approach used by state Medicaid fee-for-service (FFS) programs to the more efficient approaches used by Medicare Part D plans, Medicaid managed care organizations (MCOs), and the commercial sector, including typical state employee plans.
“This poll shows Congress and the Governors how to reduce billions in Medicaid spending without harming patients or inciting a voter backlash. Voters don’t want Medicaid to pay pharmacies more and use fewer generics than other programs,” said PCMA President and CEO Mark Merritt.
Key Findings from the Ayres, McHenry & Associates, Inc. survey include:
- By an 80 to 15 percent margin, voters don’t want Medicaid to pay drugstores more for prescription drugs than private plans pay.
- Voters support reducing spending on Medicaid, provided benefits are not cut for patients in the program. Voters support reducing spending on Medicaid by a 63 to 25 percent margin “if it did not require cutting benefits for patients in the program.” A plurality of voters opposes reducing spending on Medicaid (49 to 36 percent) “if it meant reducing benefits for patients in the program or allowing fewer people to participate in the program.”
- Voters find approaches to cutting Medicaid costs acceptable when they involve reducing costs for prescription drugs, but find cutting payments to physicians and hospitals unacceptable. Voters find “requir[ing] Medicaid patients to use generic drugs unless their doctor objects” acceptable by an 85 to 12 percent margin, find “mak[ing] local drugstores compete with each other in order to be included in a Medicaid network, like they do for Medicare Part D and private sector plans” acceptable by a 74 to 16 percent margin, and find “mak[ing] sure that different pharmacies do not issue duplicate prescriptions to the same patient” acceptable by a 74 to 20 percent margin.
- Voters find cutting payments to physicians and hospitals who see Medicaid patients unacceptable by 64 to 29 percent and 61 to 31 percent margins, respectively.
- One likely reason for voters’ flexibility regarding Medicaid pharmacy is that the vast majority of voters have at least three pharmacies in their area. Eighty-five percent of voters have at least three pharmacies in their area, including 61 percent who have more than five pharmacies in their area.
Savings Opportunities Exist In Four Key Areas
While Medicaid FFS programs and costs vary greatly state-by-state, The Lewin Group identified four key areas where pharmacy benefit management could generally be improved:
- Generic Drug Dispensing: Medicaid FFS is less effective at encouraging the dispensing of generic drugs in place of brands. The generic dispensing rate in Medicaid FFS averages 68%, compared to an average 80% generic dispensing rate in Medicaid MCOs.
- Dispensing Fees: At $4.81 per prescription, the national average dispensing fee that Medicaid FFS programs pay to retail pharmacies per each prescription is more than double the average dispensing fees paid by Medicare Part D payers, Medicaid MCOs, or health plans in the commercial sector.
- Ingredient Costs: The rate at which retail pharmacies are reimbursed for the actual medication ingredients (pills, capsules, etc.) is also higher, on average, in Medicaid FFS programs than in Medicare Part D or the commercial sector.
- Drug Utilization: The number of prescriptions dispensed per person is typically higher in Medicaid FFS programs than in Medicaid MCOs due to less effective controls on polypharmacy, fraud, waste, abuse, and other factors in the FFS setting.
Estimated Federal and State Medicaid Savings
If all state Medicaid programs used a market-based approach such that dispensing fees, ingredient costs, drug utilization, and generic drug dispensing were brought in-line with norms for Medicaid MCOs, Medicare Part D, and commercial payers, Lewin estimates that:
- Combined federal and state savings to the Medicaid program would total $30.3 billion over the next decade.
- Medicaid FFS prescription costs could be reduced by 14.8%.
- Per member per month (PMPM) costs for Medicaid FFS pharmacy benefits could be reduced by $12 in 2011 under optimal management.