No, Massachusetts, you can't run a PBM-style Medicaid formulary, feds say

stop sign (knerri61/Pixabay)
Federal officials turned down a request by Massachusetts to manage Medicaid drug coverage. (knerri61/Pixabay)

As drug pricing moves at the federal level have floundered, state officials have taken matters into their own hands. But Massachusetts is discovering there's a limit to drug-pricing innovation.

Last year, the state asked for permission to manage its Medicaid drug coverage using a formulary, just as private insurers and pharmacy benefits managers do. With the power to negotiate with drugmakers and trade discounts for coverage, Massachusetts could have sought better pricing.

But in a letter (PDF) to MassHealth assistant secretary Daniel Tsai, Center for Medicaid and CHIP Services Acting Director Tim Hill said the state's proposal didn't meet CMS requirements.

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Massachusetts' plan would have allowed the state to "continue to collect manufacturer rebates," Hill wrote, while at the same time enabling it to exclude coverage on certain drugs. Under current laws, Medicaid programs are restricted from managing coverage and must pay for all drugs that are part of a rebate agreement between drugmakers and HHS.

CMS said it will continue to work with the state "on options to test innovative drug coverage mechanisms." Arizona has also made a proposal to manage formulary coverage.

RELATED: Arizona asks for permission to manage Medicaid drug coverage 

Massachusetts' effort is one of dozens around the country as state officials aim to lower drug costs. The patchwork of new regulations is creating a growing problem for pharma, because companies increasingly must tweak their operations to meet differing reporting and transparency requirements in different states.

California, Nevada and Oregon are among the states to have passed drug pricing measures so far. According to the National Academy for State Health Policy, states around the country are considering bills focused on pharmacy benefit managers, price gouging and more. 

Maryland passed its own legislation focused on "unconscionable" generic drug price hikes, but an appeals court found the state's approach unconstitutional in April.

Meanwhile, the Trump Administration is pushing ahead with its own plan to lower drug costs. Unveiled in May, the plan seeks to step up negotiations and competition, provide incentives for lower list prices and help lower patients' out-of-pocket costs. Already, the FDA is highlighting regulatory abuses that stifle generic competition. 

President Trump in late May said some drugmakers were planning "major" drug price reductions, but so far no announcement has been made. Instead, to start July, Pfizer implemented 100 drug price hikes, according to the Financial Times. In a note Tuesday, Wells Fargo analyst David Maris outlined dozens of other price hikes from companies such as Depomed, Endo's Par Pharmaceutical, Acorda Therapeutics, Roche and more.