Arizona asks for permission to manage Medicaid drug coverage

Arizona is pushing for new government tools to fight drug costs.

As drug prices continue to weigh on public and private payers and as Congress hasn't meaningfully addressed the issue, Arizona has unveiled a plan it thinks can help it fight spiraling costs.   

The state has requested for the ability for its Medicaid program to refuse coverage of certain pricey breakthrough drugs and drugs that have therapeutic equivalents. Essentially, the state would like to manage a prescription drug formulary, as private payers do each year to pressure drugmakers for better rebates and discounts. 

Currently, the state's Medicaid system is restricted from managing coverage and must pay for all drugs that are part of a rebate agreement between drugmakers and the HHS, according to a letter from Arizona healthcare official Thomas Betlach. The new proposals are laid out in a letter (PDF) from Betlach, director of Arizona's Health Care Cost Containment System, to CMS director Seema Verma and Center for Medicaid and CHIP Services Director Brian Neale.

Arizona would like to exclude coverage for breakthrough drugs "until market prices are consistent with reasonable fiscal administration and sufficient data exists regarding the cost effectiveness of the drug, without losing the Medicaid Drug Rebate," Betlach wrote. He said in many cases, the state would cover two drugs in each therapeutic class. The prescription drug proposals are among a group of other ideas Betlach has to fight high healthcare costs.

RELATED: Nevada takes on PBMs and pharma in broad drug-pricing transparency bill

And there's an obvious reason for the request. As Betlach points out, the state's prerebate costs for prescription drugs dispensed by pharmacies grew 42% between 2014 and 2016.

Weighing in on the proposals in Arizona, a spokesperson for drug industry trade group PhRMA said the details "remain uncertain because formal waiver language has not yet been released."

"As a general matter, however, PhRMA would oppose a proposal to limit access to prescription drugs in Medicaid in light of the legal covenant that conditions the availability of Medicaid rebates on unrestricted access for patients," she continued.

Massachusetts introduced (PDF) a similar proposal back in September, part of a wave of states looking to take drug costs into their own hands after years of commentary—but no significant action—from Congress. California, Maryland and Nevada have already implemented their own drug pricing measures that take on the issue.

Maryland is focusing on "unconscionable" drug price hikes in the generic market, while Nevada's approach also targets pharmacy benefit managers and hopes to bring transparency to diabetes drug pricing.

RELATED: Maryland lawmakers pass a bill aimed at stopping 'unconscionable' drug pricing 

California, for its part, passed a bill that will require health insurers to disclose the costs of certain drugs and force pharmaceutical manufacturers to give advance warning of price hikes. Some of the info will be posted on a government website.

While dozens of states around the country are looking to take on prices, the pharma industry has resisted several of the measures. 

Meanwhile, new FDA Commissioner Scott Gottlieb is working to get prices down by increasing competition and trying to stop "gaming" of regulatory systems by pharma. Both are strategies supported by HHS secretary nominee Alex Azar, who would be coming to the job with years of experience at Eli Lilly and in the federal department during the George W. Bush Administration.