Texas to Modernize Medicaid Rx Benefits, Curb Pharmacy Overpayments

Texas Medicaid Rx Pays More than Triple the Fees that Medicare, Private Insurers Pay

(Washington, DC)— To help reduce state Medicaid spending, the Obama administration has approved Texas' plan to shift one million recipients into private health plans by 2013. Despite strong opposition from the drugstore lobby, the waiver includes a provision to modernize the state's prescription drug benefits to be operated more like affordable and efficient pharmacy benefits in Medicare and the private sector. Currently the Texas Medicaid program pays more than triple the pharmacy fees that Medicare and private insurers pay.

"By making greater use of PBM tools and administering Medicaid drug benefits more like those in Medicare and the private sector, Texas will save hundreds of millions without cutting benefits to those in need," said Pharmaceutical Care Management Association (PCMA) President and CEO Mark Merritt. "Currently, the program uses fewer generic drugs and pays drugstores more than triple the fees that Medicare or private insurers pay."

Voters would rather modernize Medicaid pharmacy than cut benefits for patients or payments to doctors and hospitals. In addition to Texas, Governors Chris Christie (R-NJ) and Andrew Cuomo (D-NY) have already enacted similar changes to reduce prescription drug spending in their own states.

Transitioning to a more efficient and affordable pharmacy benefit model would save states across the country billions without limiting access the National Center for Policy Analysis (NCPA) announced in a new white paper, "Increasing the Cost-Effectiveness of Medicaid Drug Programs." NCPA, based in Dallas, Texas, is a nonprofit, nonpartisan public policy research organization that develops private, free-market alternatives to government regulation and control that rely on the strength of the competitive, entrepreneurial private sector.

Many state Medicaid programs pay too much for prescription drugs because they use an archaic, fee-for-service approach in which state officials set payment rates and are therefore constantly lobbied to inflate them by special interests, like pharmacists. To avoid this trap, most non-Medicaid drug benefits programs – like those offered by Medicare, employers, and unions – rely upon independent, third party pharmacy benefit experts to negotiate competitive rates with pharmacies. These programs also reduce costs by employing cutting-edge, market-proven strategies to increase the use of generics.

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