State Medicaid Programs and the Changing Dynamics of Pharmacy Benefits Management

When President Obama signed the Affordable Care Act (ACA) in 2010, millions of Americans received prescription drug coverage as part of their new health insurance. While this expanded coverage provided new access to prescription drugs for many Americans, it brought with it additional pharmacy requirements for both states and the federal government. Fast-forward to five years later and those ACA requirements are putting a heavy strain on state Medicaid programs as they work to manage pharmacy benefits for an increasingly diverse beneficiary population and an increasingly expensive array of drugs.

To ensure the prescription drug needs of the newly insured are met, Medicaid Pharmacy Benefits Managers (PBMs) fill an important role between patients and the health care system, supporting everything from negotiating drug prices to processing claims. With enrollment in Medicaid and the Children's Health Insurance Program (CHIP) growing by 19 percent since 2013 -- now covering over 70 million people -- PBMs have a vast amount of new information and data to track. This influx of Medicaid and CHIP recipients, along with the rising costs of prescription drugs, means that state Medicaid programs need to evolve to address the changing landscape. They need technology solutions and business processes that help their PBM program's efficiency and accuracy, all while keeping costs down and ensuring consumers' ability to access needed medications.

New Challenges for States
As of March 2015, 29 states have chosen to expand their Medicaid programs under the ACA. This includes new income eligibility levels for adults to qualify for health insurance coverage. This change now enables states to cover more citizens under their Medicaid program, including their prescription drug needs, but is also one of the factors driving the need for PBMs to evolve.

"With Medicaid growth comes new demographics," said J.P. Crouse, Vice President at MAXIMUS, in a recent webinar on the topic. "Take, for example, childless adults, which are new to Medicaid under the ACA. These populations have brought with them a number of specific cases that Medicaid has had in the past, but traditionally not in large numbers, [such as] notable public health issues around hepatitis C, HIV/AIDS and tuberculosis. Some states have had as much as 80 percent of their infectious disease case load transfer to the Medicaid program literally overnight as part of Medicaid expansion."

Under the managed care health system, the rising cost of drugs used to treat disease like hepatitis C and HIV/AIDS puts an unsustainable strain on insurance companies, which in turn have increased their capitated rates for states. Data shows that drug costs spiked 13 percent in 2014, making it the largest increase since 2003. With the need for costly drugs for disease treatment and a rapidly growing coverage population, the need for a new vision for PBM programs is greater than ever.

The High Cost of Prescription Drug Abuse
Another costly issue that touches Medicaid programs is prescription drug abuse. While some Medicaid programs are addressing the issue through utilization, fraud management and participation in Prescription Drug Monitoring Programs (PDMPs), others still need better tools that provide full visibility into how prescription drugs are being tracked, approved and dispensed.

"Drug overdose attributable to both prescription drugs and illegal drugs is now the leading cause of accidental death in some states, having surpassed motor vehicle accidents. Now, to me, that is just a staggering statistic and Medicaid programs are now having to deal with this issue," stated Crouse. "While many Medicaid programs are beginning to address it and develop a more sophisticated approach to how they combat this issue, we have a lot of work ahead of us."

According to the Centers for Disease Control, in order for states to ensure patients receive and use medication properly and don't abuse prescriptions, they must:

  • Look to increase their use of PDMPs -- to track all prescription painkillers by state -- in order to better monitor the prescribing and dispensing of frequently abused controlled substances
  • Consider ways to assess Medicaid, workers' compensation programs and state-run health insurance plans to detect and address inappropriate prescribing of painkillers
  • Leverage program data to identify potential abuse cases

Unfortunately, a majority of the legacy pharmaceutical solutions currently used by states to manage prescription drug coverage are antiquated, and as a result are unable to adapt to the fundamental shifts in how drug benefits need to be managed under the ACA.

The Future of State Medicaid PBM Programs
In order to address the fundamental shifts in how drug benefits must now be operated under Medicaid managed care health plans and the ACA, states must seek solutions that help fully automate the entire prescription drug lifecycle and integrate it across multiple information systems. This creates an opportunity to introduce multi-program management capabilities that enable Medicaid agencies to input separate rules for each of their coverage programs, such as Medicaid, CHIP and long-term care. Such solutions can enable states to vary their Prior Authorization (PA) rules, adjudication rules and Drug Utilization Review (DUR) rules across programs so that the use of disparate systems becomes obsolete. Further, these solutions create the ability to access medical histories, diagnosis data and other important information that provides quicker and more advanced decision making for both claims authorization and PA processes.

The future version of state Medicaid PBMs must adapt to rapid growth and massive changes in rules, regulations and processes. By implementing streamlined tools and integrated approaches to drug management, states can work to not only reduce costs for their Medicaid programs, but also monitor potential drug abuse and contribute to the improved health of their citizens.