New Medicaid block grants could spark pharma pushback

New Medicaid block grants could spark pharma pushback

By Sarah Karlin-Smith |  POLITICO

01/30/2020 12:44 PM EST

The Trump administration's new Medicaid block grant plan would let states exclude coverage of some prescription drugs while still receiving the program's guaranteed drug rebates — a proposal likely to face resistance from pharma.

Drugmakers have traditionally argued that the large discounts they provide to Medicaid is part of a trade-off in which states must cover essentially all FDA-approved medicines. Under traditional Medicaid, brand drugmakers must provide states a 23 percent rebate or the best price available on the U.S market, whichever is lower.

"I expect that there will be disagreement about their legal interpretation," said Ian Spatz, a senior adviser at Mannatt and former vice president for global health policy at Merck.

The block grant program released Thursday would let states request capped federal payments to cover poor, able-bodied adults. In return, the states would be given more flexibility to administer Medicaid.

The policy says states could receive CMS permission to make drugs "available under a limited formulary," while the rebates would apply for "a drug manufacturer with a drug rebate agreement." 

CMS Administrator Seema Verma on Thursday said the new policy would give states greater negotiating power to further drive down drug prices.

CMS in 2018 rejected a similar idea proposed by Massachusetts. CMS had told Massachusetts it could create a limited drug formulary only if it gave up the mandatory discounts drugmakers provide in exchange for states agreeing to cover all medicines. At the time, Verma did not elaborate on the legal rationale for rejecting the state's plan.

States looking to establish a closed formulary under the new policy will have to at minimum meet essential health benefits set by Obamacare. That means states must cover one drug in each category or class — or more if the state mandates more robust coverage. 

States also must cover "substantially all" antipsychotics and antidepressants, HIV drugs and opioid treatment medications, consistent with Medicare Part D's protected classes rule.