Medicaid Drug Pricing in State Maximum Allowable Cost Programs

WHY WE DID THIS STUDY

To take advantage of lower market prices for certain multiple-source drugs, States may use the Federal upper limit (FUL) and/or State Maximum Allowable Cost (MAC) programs. However, FUL amounts have often exceeded market prices, and the Affordable Care Act (ACA), P.L. 111 148, required CMS to change the method it uses to calculate these amounts. Unlike the FUL program, State MAC programs give States flexibility in determining which drugs to include and in setting reimbursement rates. Because drug use is expected to increase under the ACA provisions that expand Medicaid, an aggressive MAC program may help States contain Medicaid drug costs.

HOW WE DID THIS STUDY

In January 2012, we surveyed the 45 States (including the District of Columbia) with MAC programs to identify the methods used to set MAC prices and criteria used to select covered MAC drugs. We also obtained the MAC prices and drugs covered at that time. We compared States' criteria for selecting drugs and setting prices in their MAC programs. We also calculated the aggregate percentage difference between each State's MAC prices and the FUL amounts in effect for the first quarter of 2012 (based on published prices), as well as the draft FUL amounts set by the ACA (based on average manufacturer price). Finally, we identified the State with the most aggressive MAC program and calculated the potential national savings had all States used this program.

WHAT WE FOUND

Most of the 45 States with MAC programs used acquisition cost to set MAC prices. In comparison, the pre-ACA FUL amounts were, on average, nearly double State MAC prices in January 2012, in the aggregate. However, the post-ACA FUL amounts were lower, on average, than MAC prices, in the aggregate. Although these amounts were required to take effect in October 2010, as of May 2013 CMS had not implemented them. Unlike the FUL program, State MAC programs give States flexibility in setting their coverage requirements. As a result, State MAC programs covered a wide range of drugs-significantly more than are covered under the FUL program. Lastly, we found that States could achieve additional cost savings by using more aggressive MAC pricing formulas and inclusion criteria. We identified Wyoming's MAC program as the one that could produce the greatest savings.

WHAT WE RECOMMEND

We recommend that CMS complete the implementation of the post-ACA FUL amounts. We also recommend that CMS encourage States to reevaluate their MAC programs for additional cost saving opportunities. CMS concurred with our recommendations.