Medicaid Managed Care Drug Rebates Saved States, Feds $1.6 Billion in First Year

Pharmacy Carve-In Key to Savings, Care Coordination

WASHINGTON, Sept. 12, 2012 /PRNewswire-USNewswire/ -- The Department of Health and Human Services Office of Inspector General (OIG) on Monday released a new report "States' Collection of Rebates for Drugs Paid through Medicaid Managed Care Organizations," which showed that 12 of the 22 States using a carve-in approach invoiced manufacturers and collected $1.6 billion in rebates for utilization in the second quarter of 2010 through the second quarter of 2011. The OIG surveyed states on the data collected from managed care organizations on pharmacy utilization and rebate submission to manufacturers during this period, the first five quarters for which statutory rebates on managed care pharmacy were available to states.

"One of the hallmarks of Medicaid managed care is more efficient delivery of care, including lifesaving pharmaceuticals," said Thomas Johnson, president and CEO of Medicaid Health Plans of America.  "The Medicaid managed care pharmacy carve-in model, in which prescription drugs are included in health plans' payments, encourages the use of chain drugstores and mail-order because they are more cost-efficient.  Medicaid health plans have higher generic medication dispensing rates than traditional fee-for-service Medicaid for the same reason.  Medicaid health plans are changing the way patients receive those medicines so that limited resources are spent wisely. The savings documented in this report are evidence that the model is working and working well," continued Johnson.

The pharmacy carve-in also increases the efficiency of healthcare delivery by allowing plans to coordinate pharmacy benefits with medical benefits, ensuring that patients get the medicines that are right for them. Medicaid health plans ensure that pharmacy benefits are optimally managed, which includes monitoring for harmful drug interactions, improving patient adherence and compliance, and increasing generic substitution. The $1.6 billion documented in the OIG's Report reflects only the revenue states collected from pharmaceutical companies in statutory rebates; states realize even more savings from better care coordination.

The pharmacy carve-in model is made possible by a provision in the Affordable Care Act that allows states to capture rebates on pharmacy benefits provided through managed care, which was previously limited to only traditional fee-for-service Medicaid. This "Drug Rebate Equalization" was a top legislative priority for MHPA for many years.  The OIG report found that the rebate expansion has prompted five states – Illinois, Ohio, New York, Texas, and Utah – that previously used the carve-out approach to change to a carve-in approach, showing the importance and far-reaching effect of this legislation.

"Including a treatment option as important as prescription drugs in Medicaid managed care contributes to the strength of the coordinated care model," Johnson noted. "This integrated care benefits all patients, especially those with multiple chronic conditions like the population dually eligible for Medicare and Medicaid. Medicaid health plans' proven care coordination strategies like the pharmacy carve-in can go a long way in terms of keeping costs down as is shown in this report. But, more important, models like this move us closer to improving outcomes for our nation's most needy."

About MHPA
Medicaid Health Plans of America is the leading national trade association solely focused on representing the universe of Medicaid health plans. MHPA provides advocacy, research and organized forums that support the development of policy solutions to enhance the delivery of quality health care to Americans in need.

Media Contact:
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SOURCE Medicaid Health Plans of America