Michigan Prepared to Create Medicaid Drug Formulary To Save $42 Million

In an effort to cut $42 million from its "burgeoning" Medicaid budget, Michigan is preparing to put "several hundred popular" drugs on a formulary unless manufacturers agree to cut prices, the Wall Street Journal reports. Over the past three years, the state's spending on pharmaceuticals for Medicaid patients has doubled; this year, drugs for Medicaid will cost an estimated $1.1 billion. To rein in costs, the state Legislature passed a law earlier this year directing the state Department of Community Health to "devise a program" to lower Medicaid costs. Under the department's proposal, a medical panel will select two drugs from each of 40 "therapeutic categories as 'best in class,'" the Journal reports. Doctors could prescribe these drugs "regardless of price." For drugs not on the list, doctors will need "several authorizations" from the state before prescribing them, in an effort to discourage use. However, pharmaceutical companies may keep their drugs off the restricted list by cutting prices to match the selected drugs. In addition, drugs "already cheaper" than those on the formulary would not need prior authorization. The medical panel is expected to "finalize" its list of drugs Nov. 19. The program will apply initially to Medicaid fee-for-service patients, but if "successful" will be extended to cover Medicaid managed care patients. Under the law, leaders of the Michigan House and Senate have until this week to block the program "if they see fit."

Possible PhRMA Legal Challenge
Drug companies say Michigan's proposed program would "deny" drugs to low-income patients. Instead, the Pharmaceutical Research and Manufacturers of America has suggested that Michigan create a state-run prevention-oriented program to cut costs. Michigan officials, however, "rejected" that idea, saying such programs will not save "as much money as deeper discounts" on prices. And though the Michigan formulary is similar to one passed by Florida earlier this year, Michigan has so far "rejected striking the kind of side deals Florida did" with Pfizer and Bristol-Myers Squibb to keep their drugs off the restricted list in exchange for managing preventive care programs to cut medical expenses. The Journal reports PhRMA is "considering a legal challenge" to the Michigan program. A suit against the Florida program is pending in federal court (Caffrey, Wall Street Journal, 11/12).