New report advocates replacing Medicaid FFS with managed pharmacy benefit

February 15, 2011

A new report urges states to replace Medicaid fee-for-service pharmacy programs with the kind of managed drug benefits used in Medicare Part D plans, Medicaid managed care organizations, and some commercial health plans.

Key Points

A new report urges states to replace Medicaid fee-for-service pharmacy programs with the kind of managed drug benefits used in Medicare Part D plans, Medicaid managed care organizations, and some commercial health plans.

Why drop FFS? Optimal pharmacy benefit management could save $30 billion over the next decade, the report claimed. In the near term, savings of $12 per member per month in 2011 can be expected.

The claim comes in an analysis of Medicaid drug spending commissioned by the Pharmaceutical Care Management Association (PCMA) and conducted by The Lewin Group, healthcare and human services consultants. The projected savings include a combination of reduced dispensing fees, reduced ingredient-cost reimbursement, increased generic use, and decreased drug utilization. The key message in the report is that pharmacy benefit managers (PBMs) can cut Medicaid expenditures.

"We, like every other health-related group, have been looking for ways to save money in Medicaid without cutting benefits or harming patients," PCMA President and CEO Mark Merritt told Drug Topics. "Medicaid is not a traditional PBM space, but this is a space legislators are going to look into. This report is intended to spark discussion so policymakers don't start slashing without seeing the larger picture."

Merritt said the key audience for the report is governors and state legislators around the nation. PCMA hit the same audience with a telephone survey of registered voters suggesting that respondents preferred to cut expenditures for prescription-drug coverage rather than cutting payments to physicians or hospitals. There was no immediate reaction from state officials, but at least one pharmacy group said PCMA was using Medicaid spending to build support for its PBM membership.