Brace yourselves for likely Medicaid cuts

Despite all the press coverage of healthcare reform, there's a real dearth of cold, hard facts. Of course facts tend to be less exciting than the rhetoric du jour, but in the company trenches, it's facts that make the difference. So we were surprised to see a little anticipatory number-crunching in Pharmaceutical Executive. Even though the final reform bill is far from hashed out, some of the political winds are clear. And it's those winds that will affect the way pharma does business as early as next year, with or without overall reform.

Heather Whipple, a research director at Health Strategies Group, wrote the analysis of probable Medicare and Medicaid changes, and from a drugmakers' profit-oriented perspective, they're none too pretty. Minimum Medicaid rebates are likely to increase from average manufacturer price minus 15.1 percent to minus 23.1 percent, Whipple predicts. And those rebates are likely to be extended not only to the commercial health plans delivering Medicaid--a.k.a. Managed Medicaid--but also to the 9.6 million folks who used to get their drugs via Medicaid but now do so via the less-stringently-discounted Medicare.

Meanwhile, Medicare Advantage plans are likely to ask for deeper discounts; after all, if Medicaid-style rebates apply to private-sector Managed Medicaid, then why wouldn't insurers ask for the same for their Medicare patients? And, Whipple predicts, commercial health plans will also push for bigger discounts. Drugmakers can always say no to these folks, however, so we can expect plenty of hardnosed negotiation on both sides.

And by the way: the Medicaid changes are likely to come down the pike even if overall reform falls apart. Pharmaceutical companies should expect to feel an additional squeeze in Medicaid in 2010," Whipple writes, "as it is a nearly a foregone conclusion that Congress will increase the mandated minimum rebate in Medicaid regardless of its success or failure implementing broader healthcare reform." Forewarned is forearmed.

- read the PharmaExec piece