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Lower Drug Costs: The Next Frontier for State Flexibility

lower drug costs state flexibility

The Trump administration has signaled that its fiscal year 2019 budget will include opportunities for up to five states to test new approaches to managing their Medicaid prescription drug program. That’s welcome news and an important first step. Massachusetts has requested a waiver to restructure its pharmacy program to use some of the tools available in the commercial market, and Arizona has indicated interest in a similar proposal—both initiatives appear tailor-made for the administration’s recent proposal. But in its report, Reforming Biopharmaceutical Pricing at Home and Abroad, the White House dedicated only one page in its 28-page document to addressing states and their Medicaid programs. There is more for the federal government to do to help states control prescription drug costs and more activity currently underway in many states. At a recent National Academy for State Health Policy (NASHP) forum, state officials identified a number of approaches that, with federal help, can lower the drug cost trajectory.

Will Federal Flexibility Strengthen State Efforts To Rein In Prescription Drug Costs?

Utah, Vermont, West Virginia, Oklahoma, and Missouri are advancing legislation to create safe and cost-saving wholesale drug importation programs of certain costly drugs from Canada—an initiative that requires authorization from the secretary of the Department of Health and Human Services to implement. In Oklahoma and a dozen other states, Medicaid programs are developing alternative payment models for high-cost specialty drugs with the help of SMART-D (State Medicaid Alternative Reimbursement and Purchasing Test for High-Cost Drugs). A template rebate agreement supporting this work is currently under review by the Centers for Medicare and Medicaid Services (CMS). Approval would create a pathway to speed development of these alternative payment models with the potential to help Medicaid programs better manage the unsustainable burden of costly drugs. These are the first waves of state activity, but it is clear states will continue to seek broader federal flexibility to help address pharmaceutical costs.

Read full post on Health Affairs Blog. Originally published February 16, 2018. 

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Trish Riley