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Medicaid Drug Programs Could Save $30B by Dropping FFS, Study Claims

John Commins, for HealthLeaders Media, December 6, 2010

State Medicaid pharmacy programs could save more than $30 billion over the next decade if they switched from fee-for-service programs to the more efficient approaches used by Medicare Part D plans, Medicaid managed care organizations, and commercial plans, claims a study from healthcare and human services consulting firm, TheLewin Group.

The study notes that Medicaid FFS pharmacy programs use fewer generic drugs and pay pharmacies higher dispensing fees and ingredient costs than other programs.

Lewin said the findings challenge the assumption that Medicaid pharmacy can reduce costs only by cutting benefits, limiting eligibility, demanding deeper manufacturer rebates, or paying drugstores higher dispensing fees in exchange for more pricing transparency.

"Medicaid is one of the few pharmacy benefit programs that still relies heavily upon a fee-for-service approach. By operating more like Medicare and commercial market plans, Medicaid could increase the use of generics and save billions without cutting benefits," said Pharmaceutical Care Management Association President/CEO Mark Merritt. 

Three-fourths of Medicaid pharmacy dollars are administered using a fee-for-service approach in which public officials play a role in determining how much to pay drugstores for each prescription filled and ingredient costs.

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