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7/21/2001

New England States Band Together in Medicaid Drug Program

Donna Young

The New England states of Maine, New Hampshire, and Vermont have joined together to form a prescription drug coalition to help control the cost of their Medicaid programs.

The Tri-State Prescription Drug Purchasing Pool was formed last year after the states’ governors met to discuss common health care concerns.

States outsource prescription benefit. The coalition is contracting with First Health Services Corp. of Glen Allen, Virginia, for pharmacy benefit management services.

David Winslow, spokesman for Maine’s Department of Human Services, said that under the contract, First Health will analyze the types of prescriptions physicians prescribe to Medicaid beneficiaries.

"This is a significant opportunity to manage those habits under a utilization-review process," Winslow said. "First Health can educate the doctors about drugs that are equivalent therapeutically but are less expensive" than the products the physicians had been prescribing.

Winslow said First Health is responsible for developing direct-mail information to advise physicians about lower-cost drugs.

"In some cases, physicians may have to be contacted directly," he said.

Winslow added that First Health would also manage and process Medicaid claims for Vermont and New Hampshire but not for his state.

"Maine already has an advanced claims-processing system in place," he said.

The contract is scheduled to be implemented this fall. At press time, terms of the contract were still under negotiation.

Federal court rules against Vermont program. Separate from the Tri-State Pool, which applies to Medicaid beneficiaries only, Vermont and Maine recently implemented prescription-drug discount programs for low-income residents. But a ruling in June by the U.S. Court of Appeals for the District of Columbia Circuit has put the Vermont Pharmacy Discount Program (PDP) on hold.

Under Vermont’s PDP, pharmacies would charge new beneficiaries the Medicaid price of a given drug minus the estimated average federally mandated rebate (about 18%) that Vermont receives for all drugs dispensed to its residents enrolled in Medicaid. Vermont would pay the pharmacies the 18% and then bill manufacturers for that amount. As a result, PDP benefits would be paid, not with funds appropriated by Congress and the states for Medicaid services, but by beneficiaries (82%) and drug manufacturers (18%).

The Pharmaceutical Research and Manufacturers of America sued Vermont, arguing that PDP violated the Medicaid program.

In its ruling, the court barred Vermont from offering reduced drug prices under the program, saying the federal Department of Health and Human Services (HHS) acted improperly when it approved PDP.

In its decision, the court said that perhaps Congress could authorize HHS "to accomplish directly what it has done indirectly through the Vermont PDP—require pharmaceutical manufacturers to provide substantial discounts to individuals not otherwise covered by state Medicaid programs." But, the court said, because Vermont makes no payments for Medicaid under PDP, HHS lacked authority to approve the program.

"Determining how to fund pharmaceutical benefits for the poor and whether their cost should be shared by pharmaceutical manufacturers is a responsibility that, absent express congressional direction to the contrary, must be left to Congress," the court said.

Maine’s discount drug program, implemented in early June, is modeled after the Vermont program.

"The Healthy Maine Prescriptions program is significantly different because it incorporates our Low Cost Drugs for Elderly program," Winslow said.

He said that, in addition to the 30,000 participants carried over from the state’s low-cost program for the elderly, 20,000 residents who lack insurance coverage for prescription drugs had applied to the program within its first month.