‘Stymied’ in Efforts to Lower Medicaid Drug Costs, Indiana Weighs Cuts to Pharmacies

Indiana has failed to follow the lead of states such as Florida in taking steps to reduce Medicaid spending on prescription drugs, the Indianapolis Star reports. Already this year, state lawmakers tried unsuccessfully to require state approval before brand-name drugs were dispensed to Medicaid patients. Now the state wants to "encourage greater use" of generic drugs, but officials are being "stymied" by opposition from mental health advocates and the state's own pharmacy advisers, according to the Star. State Medicaid Director Kathleen Gifford said she would like to "force" drug makers to lower prices, but "she isn't sure a smaller state like Indiana would enjoy the same leverage" with drug makers as does a "more innovative" state such as Florida, which recently required pharmaceutical companies to provide discounts to its Medicaid program. Critics of Indiana's system say "no coherent drug policy has emerged."

Targeting Pharmacies
Indiana is also considering "pharmacy cuts," in which Medicaid reimbursement to pharmacists will be lowered (Corcoran, Indianapolis Star, 7/24). Under the plan, Medicaid would lower the fee pharmacies receive for filling beneficiaries' prescriptions to $3 from the current $4 and would "slice drug markups by as much as half." Officials hope to cut almost $100 million from the state's $1.15 billion Medicaid drug budget, concerned that spending on the $3.5 billion state and federal health care program will exceed available funds by mid-2003 (Corcoran, Indianapolis Star, 7/24). According to the Star, however, critics say the plan to cut pharmacy reimbursements would "hardly dent" projected increases in Medicaid spending (Indianapolis Star, 7/24). In addition, pharmacies "big and small" are "warning" the state that they may have to reduce hours and close stores in "rural and inner-city" areas if the Medicaid cuts take effect. "We may need to reduce pharmacy hours in many stores in heavy Medicaid communities in order to keep those stores open at all. This would hurt everyone -- whether on Medicaid or not," said Brian Richards, manager of a Walgreen pharmacy. According to Stephen Schondelmeyer, director of The PRIME Institute consulting group, the plan is "shortsighted" because "it will do nothing to rein in manufacturers' drug prices or consumer demand." Gifford, however, says that while the reduction would lower the Medicaid payment rate below that of "most other states," the state would still pay more than "many private-sector health plans." Gov. Frank O'Bannon (D) and Attorney General Stephen Carter must agree to the plan before the cuts take effect (Indianapolis Star, 7/24). For further information on state health policy in Indiana, visit State Health Facts Online.