Taxpayers Losing $1M Every 4 Days That Carve-In Remains Incomplete
FOR IMMEDIATE RELEASE
March 7, 2015
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The Texas Association of Health Plans, the statewide trade association representing all major health insurance plans, both commercial and public, today announced the results of a new study finding that the State of Texas is losing millions in taxpayer dollars by failing to fully carve in the Medicaid prescription drug benefit.
Texas’ partial carve-in occurred in 2012, when the State made the important and welcome decision to transfer responsibility of the prescription drug benefit in Medicaid to private health plans, also known as managed care organizations (MCOs). This was a step in the right direction, but the carve-in was not fully implemented.
While MCOs were given the responsibility to manage the Rx benefit, they were not allowed to use time-tested market-driven tools to keep prescription drug costs low. Unlike other states, Texas MCOs are required to use a single, uniform state formulary when determining which prescriptions to purchase, instead of using their own prescription drug lists (PDLs), which are market-based and encourage lower-cost generics over more expensive brand-name drugs. According to new TAHP-commissioned research carried out by national consulting firm, The Menges Group, Texas taxpayers are losing $1 million for every four days that the State of Texas fails to fully implement the carve-in, totaling $100 million each year.
It’s time to eliminate the barriers that are keeping Texas Medicaid health plans from ensuring Texans in Medicaid have access to the life-saving drugs they need, when they need them, and to do so in a way that brings down costs, saves taxpayer dollars, and improves the quality of care” said Jamie Dudensing, TAHP CEO and a former practicing nurse.
Under the incomplete carve-in, the State is using an approach that favors more expensive brand-name drugs and a price-focused strategy of pursuing rebates from pharmaceutical companies to offset Rx costs, an effort that tries to play catch-up at the back end for paying much higher amounts to the pharmacies to begin with. The more effective approach would allow MCOs to manage the Rx benefit using their own PDLs and time-tested care management tools to provide quality, affordable prescription drugs to beneficiaries and save money. MCOs pay much less up-front through managing the drug mix, with manufacturers still paying rebates on all Medicaid prescriptions.
Fresh research shows Texas is losing millions in taxpayer dollars by failing to fully implement the Medicaid Rx carve-in:
Texas taxpayers lose $1 million every 4 days due to the incomplete Medicaid Rx carve-in that restricts Medicaid health plans from fully managing prescription drug care and costs.
Under this current structure, 21 states are out-performing Texas in managing drug costs with Rx costs; these states’ costs are 21% lower than the national average and 19% lower than Texas.
By eliminating the barriers and restrictions that prevent Medicaid health plans from better managing prescription drug, Texas has an opportunity to achieve savings. Texas is projected to achieve $230 million AF in savings per year, including $94 million GR savings by allowing Medicaid health plans to fully manage prescription drugs.
Texas’ incomplete carve-in has resulted in Texas ranking 45th among states for use of lower-cost generic drugs in Medicaid.
In Texas, the cost of brand-name drugs remains 5 times higher than the lower-cost generic alternatives—even after rebates are included.
“States that focus on maximizing the use of generics have drug costs that are 24% lower than states that focus on maximizing rebates.”
Relative to the MCOs’ processes, the single state Medicaid formulary in Texas is slow to respond to market changes, clinical data, and safety guidelines. It has created administrative challenges for Medicaid health plans, providers, and pharmacies and has restricted health plans’ efforts to improve patient outcomes and manage prescription drug costs.
Nationally, other state Medicaid health plans that currently fully manage the prescription drug benefit have already demonstrated stronger ability to steer volume to generic therapies and lower prescription drug costs. The report demonstrates that Texas’ MCOs operating in other states have much lower Medicaid pharmacy costs in those states than they have been able to achieve in Texas under the restricted carve-in model.
Health plans have a proven track record of reducing drug costs and maximizing the use of generics, not only in the private market but in other public programs such as Medicare, TRICARE, ERS, and TRS.
By restricting the ability of MCOs to manage their own PDLs, the opportunity to achieve more than $1 billion dollars in total Medicaid savings since the 2012 carve-in has been lost.
A copy of the study, Assessment of Medicaid MCO Preferred Drug List Management Impacts, conducted by The Menges Group, can be found here, as well as The Menges Group’s summary of their findings, here.
TAHP documents with further background on the study and infographics can be found here and here.
The Texas Association of Health Plans
The Texas Association of Health Plans (TAHP) is the statewide trade association representing private health insurers, health maintenance organizations, and other related health care entities operating in Texas. Our members provide health and supplemental benefits to Texans through employer-sponsored coverage, the individual insurance market, and public programs such as Medicare and Medicaid. TAHP advocates for public and private health care solutions that improve the affordability, access and accountability of health care for many Texans. As the voice for health plans in Texas, TAHP strives to increase public awareness about our members’ services, health care delivery benefits and contributions to communities across Texas.