As Rising Drug Costs Boost State Spending on Medicaid, States Take Action to Encourage Use of Generic Drugs

State expenditures on Medicaid are expected to increase by 11.1% in FY 2002, fueled mostly by rising pharmaceutical costs, according to preliminary figures from a survey by the Kaiser Commission on Medicaid and the Uninsured, the Wall Street Journal reports. Despite some cost-cutting efforts, including asking pharmaceutical companies for rebates, Medicaid spending in FY 2002 will "grow faster" than in FY 2001, which saw an increase of 9.9%, the survey found. Forty-eight states indicated that rising pharmaceutical costs are one of the top "two or three" factors driving higher Medicaid expenditures. Vernon Smith, a principal with Health Management Associates, which worked with Kaiser on the survey, said, "There is no question that pharmacy growth is in the middle of everybody's radar screen." Other expenses cited by the states include increased nursing home and provider reimbursements, higher enrollment figures and higher long term care costs. The Journal reports that 20 states already expect to need "supplemental budget funds" or will use "emergency" Medicaid trust funds to "meet" rising Medicaid costs by the end of the current fiscal year. Last year, 36 states needed supplemental funding (Gold, Wall Street Journal, 8/22).

Encouraging Use of Generics
Faced with drug cost increases of 15% to 20% in their Medicaid programs, states such as Alabama, Arkansas, Florida, Maine, Michigan and Oregon have begun sending pharmacists to "urge doctors to write fewer prescriptions and to switch to cheaper drugs, such as generics," the Wall Street Journal reports. Mississippi and Washington plan to start their own efforts soon. The move is aimed to counter pharmaceutical companies' practice of "detailing," in which an "army of sales representatives" visits doctors' offices to deliver free samples and other "freebies" to encourage doctors to prescribe a particular brand. Last year, drug companies spent $4.8 billion on detailing in the United States, an increase of 11% over the previous year, and sales reps made 61.4 million visits to doctors. In contrast, "counter-detailers" in Florida made 740 visits to doctors between October and June of this year. The Journal profiles pharmacist Ileana Soto, who visited 88 Florida doctors who "tended to prescribe" Vioxx and Celebrex, costly anti-inflammatory drugs, instead of cheaper generics. During her visits, Soto explained that ibuprofen or naproxen could be "just as effective" and less expensive than the brand-name drugs. By January, doctors were writing fewer prescriptions for Celebrex and Vioxx, a move expected to save Florida's Medicaid program $196,000 per year. Soto now is working on other drug classes, "with similar results."

Competing for Face Time
Pharmaceutical Research and Manufacturers of America spokesperson Jeff Trewhitt said that the drug industry does not object to counter-detailing, adding, "They have the same First Amendment right to educate physicians that we have." Detailers and counter-detailers often compete with each other for doctors' time, but doctors "are often more willing to talk to pharmacists" instead of sales representatives, Soto says. One market research firm found that doctors give counter-detailers an average of 13 minutes to "make their case," compared with 90 seconds to five minutes for sales reps. A number of claims-data-management firms have sprouted up to help states, insurers, employers and other entities that want to control health costs. For example, Florida pays ACS State Health Care LLC of Atlanta $11.7 million per year for services such as scanning prescription records to identify physicians who "rely heavily on" brand-name drugs (Gold, Wall Street Journal, 8/22).