The reimbursement war: report from the LTC pharmacy front; medication costs and administration have been key issues in the struggles over government reimbursement to providers - Feature Article

Nursing Homes, Oct, 2002 by Jon Rawlson

* California. Lawmakers in Sacramento face a $24 billion budget shortfall and are seeking dramatic cuts in reimbursement rates as a result.

* Massachusetts. Although pharmacy was successful in receiving an exemption granted by the state legislature earlier this year from proposed rate reductions, Gov. Jane Swift vetoed that exemption and placed the pharmacy reimbursement issue up for a hearing by the state's Health Care Finance and Policy Commissioner. The proposed rate would reduce pharmacy reimbursement by 12%, giving the state the lowest reimbursement rate in the country.

In many cases, pharmacists have offered solutions to help state Medicaid agencies achieve enormous savings. For example, in Indiana pharmacists successfully convinced officials to split brand-name arid generic drugs into separate categories for reimbursement, a move that saved the state $14 million. In the state of Washington, the pharmacy community proposed changes in policies and procedures to save taxpayers almost $50 million in just a few months; solutions included:

North Carolina. The state will move to a PDL by the end of the year. The North Carolina program will be set up like Michigan's, where a "reference price" for each therapeutic drug category is established.

* empowering pharmacists to help educate prescribing physicians on less-expensive generic medications.

* using generic medications as soon as the generic versions are available. At present there is a mandated but costly 180-day delay.

* using the state's schools of pharmacy to help review and reduce the average number of medications certain Medicaid patients are taking. Some patients take 30 or more prescription medications in addition to OTC medications. Simply eliminating unnecessary or duplicative medicines would achieve an estimated $11 million in savings.

* With PDLs, states Create a list of prescriptions that Medicaid providers can prescribe to patients without receiving prior authorization. For drugs not on the list, prior authorization must be obtained.

Michigan and Florida: The Pioneers

Two of the more watched states for pharmacy-related reimbursement issues are Michigan and Florida. In addition to having very large Medicaid enrollments, they were two of the first states to implement PDLs.

Florida's Agency for Healthcare Administration, which houses its Medicaid agency, implemented a PDL in 2001 but subsequently exempted LTC for reasons advocated by the LTC pharmacy industry. Through the implementation of the PDL, Florida expects to save almost $200 million in Medicaid drug expenses this year. In Michigan, David Viele, deputy director of the state's Medicaid agency, estimates that since the implementation of the PDL in his state, average weekly pharmacy costs have dropped by nearly $500,000. Michigan has been problematic for LTC pharmacy providers, however, because exemptions do not yet exist for many of the most highly prescribed drugs for nursing home residents.

It should be noted that the pharmaceutical manufacturing industry, unhappy with the restrictions placed on prescribing patterns by the PDLs, has filed several lawsuits to block their use. So far, the courts have backed the states and validated their use.