Arkansas Medicaid Director Leads Nationwide Push for Cheaper Prescription Drugs

The New York Times on Jan. 13 profiled Arkansas Medicaid Director Ray Hanley, a "leader in an increasingly vocal and organized campaign by state Medicaid officials around the country to reduce the cost of prescription drugs covered by Medicaid." Hanley's efforts, which are making the pharmaceutical industry "anxious," include urging doctors to prescribe generic drugs; maintaining an e-mail network that "lets him communicate prices and other information quickly to Medicaid directors in every state"; and forming alliances with other states to press drug companies for cheaper prices. Hanley's "tough" style has yielded results. Following an agreement between Pfizer and Florida last year in which the drug maker agreed to institute disease management programs in exchange for having its drugs on the state's Medicaid formulary, Hanley told the 15 largest drug companies that he expected "similar cost-saving proposals" in Arkansas. Schering-Plough is now paying for an education program for children with asthma enrolled in Medicaid, Eli Lilly is funding a similar program for Medicaid beneficiaries with diabetes and Purdue Pharma has contributed $100,000 for a software program to help fight prescription drug abuse. When Hanley assumed his current position in 1986 -- he is the longest-running Medicaid director in the country -- Arkansas' Medicaid program spent $38 million on prescription drugs. In the fiscal year that ends June 30, the tab will approach $300 million. Hanley attributes much of this increase to drug companies' use of direct-to-consumer advertising, which he calls "infuria[ting]." The Times reports that Hanley's zeal in attempting to reduce costs "has made him something of a legend among other Medicaid directors and given drug companies reason to watch what he does."

Answering the Critics
But some critics say Hanley takes his cost-cutting approach "too far," the Times reports. He recently proposed balancing the Medicaid budget by cutting some children's services, saying that the state simply could not afford them. "Sometimes he seems a bit pulled away from the people he's trying to help," Arkansas House Speaker Shane Broadway (D) said. But Hanley said, "We have only so much money in this budget. If we can't live within that budget, we have to make cuts. Is that heartless? So be it." Hanley has also received criticism from pharmacists who object to his plan to create a "single wholesale provider" for all prescription drugs obtained by Medicaid beneficiaries in nursing homes, saying it will put many pharmacists "out of business." Hanley himself admits that some of his cost-cutting attempts have been mistakes, such as a plan to order steep discounts from drug retailers for commonly prescribed drugs. "It probably wasn't the best idea I've ever had," he said, adding, "But I pride myself on pushing the envelope" (Barnes, New York Times, 1/13).