Officials: Spending on Medicaid Drugs Follows Industry Norm

BATON ROUGE, La. (AP) — Louisiana health officials Tuesday were skeptical the state could save sizable sums of money by reworking the way it runs the prescription drug program for Medicaid patients, as lawmakers press to find ways to curb spending.

State Medicaid Director Jen Steele told a study group created by lawmakers that Louisiana uses an industry-standard method to make prescription drug payments to the managed-care companies, which oversee care for 90 percent of Medicaid patients. Steele said administrative costs are capped to keep the Medicaid program from wasting money on unreasonable fees.

"That's our way to protect against excessive expenses," Steele said.

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The study group is digging into spending on the managed-care deals as it seeks ideas for containing costs in a Medicaid program that costs $12.5 billion this year, nearly half the state's operating budget.

Lawmakers and others on the panel have questioned whether the medication charges have been marked up to help boost profits for private companies. They note that Louisiana pays millions of dollars more to the managed-care firms for drugs than is passed along to pharmacies filling the prescriptions.

"Are they over-billing the state?" asked Rep. Tony Bacala, an Ascension Parish Republican.

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Louisiana contracts with five managed-care companies to coordinate health services for nearly 1.5 million Medicaid patients. The state pays a per-member, per-month fee for each person enrolled in a health plan with the companies.

When a Medicaid patient gets a prescription from a pharmacy, the managed-care companies reimburse the pharmacies for the medication through "pharmacy benefits managers," middle-management firms that are either owned by the managed-care companies or have a contractual relationship with them.

The pharmacy benefits manager often charges the managed-care company more for the drugs than the amount paid to pharmacists and then keeps the difference — in addition to a fee already paid to the company for its work. Republican Sen. Fred Mills, a St. Martin Parish pharmacist, said roughly $70 million was spent in those add-on charges in one year reviewed.

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Members of the study group have asked if the administrative charges are being tracked and if they are appropriate.

"It almost seems like we're double-paying administrative costs," Bacala said.

Mills, whose store fills prescriptions for Medicaid patients, asked: "Are we getting the best deal?"

Jeff Reynolds, the Department of Health's chief financial officer, said the per-Medicaid patient fee to the managed-care companies is determined through a complex formula that doesn't change no matter how much is paid to the pharmacy benefits manager. He said it doesn't change the way pharmacists are reimbursed for Medicaid prescriptions.

Mills asked the health department to do more detailed calculations of the per-prescription cost charged in administrative fees so that it could be compared to the costs of private insurance programs and to Medicaid programs in other states.

Questions about the Medicaid spending come as Gov. John Bel Edwards' administration is planning to extend the contracts with the five managed-care companies through 2019. The deals initially were struck by former Gov. Bobby Jindal's administration and are set to expire in January. Republican lawmakers have questioned the $15.4 billion price tag of the extensions.

– By Melinda Deslatte, Associated Press 

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