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CMS Rejects Massachusetts' Medicaid Drug Price Plan

Analysis  |  By John Commins  
   June 28, 2018

Federal regulators pledge to continue to work with the state to address soaring costs in the Medicaid program that covers about 1.3 million residents. 

The Centers for Medicare & Medicaid Services has rejected a Massachusetts plan to kick about 140,000 people off the Medicaid rolls and limit some expensive prescription drugs covered under the program.

Massachusetts had submitted a waiver request last fall, asking CMS for the ability to negotiate the price of about 30 high-price drugs that make up $600 million — or 30% — of pharmacy spending for MassHealth, the state's Medicaid program.

The state said the reforms are needed to address ballooning program costs. MassHealth's pharmacy spending has doubled from $1.1 billion to $2.2 billion in the past five years.

In a letter this week to Daniel Tsai, assistant secretary of MassHealth, CMS said the state's Medicaid program can collect drug rebates but only if state Medicaid plans cover all drugs approved by the federal government. Massachusetts gets $900 million annually in drug rebates, and $550 million is sent back to the federal government. 

In a statement, Gov. Charlie Baker's administration said: "While it is disappointing that our request to more effectively control rising pharmacy costs was not approved at this time, we remain committed to finding more innovative state-based solutions to reduce the growth in drug spending while maintaining access to necessary medications."

Matt Salo, executive director of the National Association of Medicaid Directors, called the rejection of the waiver "disappointing because it was an extremely well-thought out proposal that would have brought some rationality into the current environment of outrageous drug pricing."

"The Massachusetts waiver was heavy on patient protections and ensuring access to necessary cures/treatments," Salo said. "It would have given them the leverage they needed to bring some much needed market leverage to bear on the new 21st Century Cures innovations that are going to break the system before too long."

Salo said it appears that CMS is trying to force Massachusetts to opt for the '5 state demo' that was first outlined in President Trump's Budget.

"But nobody wants that demo," he said. "Massachusetts is saying that the current system works well enough for most patients and most products, so there’s no need to throw the baby out with the bathwater."

  • CMS also shot down the state's plan to remove about 140,000 Medicaid enrollees who earn more than 100% of the federal poverty level and shift them to ConnectorCare, which would have paid Massachusetts about $120 million more in federal reimbursements.
  • Medicaid patient advocates cheered CMS's rejection. Health Care For All Executive Director Amy Rosenthal urged the Baker administration to work with the state legislature to strengthen MassHealth's ability to negotiate lower drug prices, and to find "alternative avenues" for reducing spending growth, rather than simply kicking enrollees off the program.  
  • Lindsay Bealor Greenleaf, director at ADVI Health, said "It's a relief to see the administration do the right thing and reject this waiver request, because if Massachusetts had gotten its way, Medicaid patients would have limited treatment choices and industry would doubt whether future deals struck with the government will hold up over time."

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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