Medicaid block grants would let states exclude some drugs

MEDICAID BLOCK GRANT guidance unveiled late last month would allow states to exclude some prescription drugs from their formularies.

Legal experts say the policy is a blatant reversal from the CMS’ previous position. The agency in 2018 denied Massachusetts’ request to employ a similar strategy.

Massachusetts requested a waiver to use a closed formulary in its Medicaid program, but the CMS rejected it saying the state would have had to give up substantial statutory rebates and negotiate rebates with manufacturers to have the authority to exclude drugs from coverage.

But in its new Healthy Adult Opportunity initiative, states would be able to exclude drugs from their formularies for adults who don’t qualify otherwise for Medicaid coverage and would still be able to keep statutory rebates. States would still have to cover drugs used to treat opioid use disorders, mental health issues and HIV.

Tennessee asked the CMS for flexibility to exclude some drugs from its formulary in its block grant waiver request.

CMS Administrator Seema Verma Jan. 31 tweeted that Massachusetts’ proposal and the new block grant option differ because the latter would only apply to a narrow swath of Medicaid beneficiaries.

But Rachel Sachs, an associate professor of law at Washington University in St. Louis, argued that the block grant policy signals a change because HHS Secretary Alex Azar previously said using a closed formulary while receiving statutory rebates would be illegal double-dipping.

Edwin Park, a research professor at Georgetown University’s McCourt School of Public Policy, said he views the potential optional expansion population as another eligibility category under Medicaid, not as a fundamentally different population.

Park voiced concern about the unclear role of federal oversight in ensuring clinically appropriate drug coverage under the new block grant programs.

Prescription drug spending made up only 5.1% of Medicaid expenditures in 2017, according to the Medicaid and CHIP Payment and Access Commission. That means in order for states to see an impact on overall spending, access restrictions would have to be significant.

Drugmakers are unhappy with the closed formulary option because they provide significant statutory discounts for the Medicaid program in exchange for their drugs being covered. ●