Confusion In The Buckeye State - Part 2

So what's the bottom line?

The State of Ohio paid a little over $3 billion for medications through Medicaid in 2016. If they paid V.A. prices for those medications, my estimate is that they would save about 10-15% of that. Why is it an estimate, and not a hard number? Well, there a lot of reasons, but there's two big ones.

First, the list of drugs available from the V.A. is much smaller than the list available from Medicaid. This is generally not because the drugs are different, but because Medicaid pays for a much wider variety of packaging than the V.A. does. Medicaid prescriptions are fulfilled through commercial pharmacies, so there are a lot of different options for how a particular prescription gets filled. V.A. medications, on the other hand, go through a relatively small number of outlets (V.A. Hospitals and clinics) so they can use a much smaller number of packages. (Incidentally, this smaller list gives the V.A. advantages in dealing with the drug companies, and efficiency in handling their stock of medications.)

Because of these differences, it simply isn't possible to get a one-to-one match between a Medicaid prescription and a corresponding V.A. prescription. My estimate includes an estimate of what the pricing would be, if in fact the V.A. actually had a price for all those packages. That's my estimate only.

"Nobody knew that health care could be so complicated". . . Donald Trump

But the bigger challenge is called the Medicaid Drug Rebate Program. This is a program under which the individual state Medicaid agencies get rebates from the Pharmaceutical Companies based on the amount of their drugs the state Medicaid program pays for. Essentially an earned-discount program. The Federal Medicaid folks calculate a baseline rebate amount, which is set by law. The individual states then negotiate their actual rebates with the drug companies. The actual rebate amounts are confidential. This gives the states negotiating leverage with the Pharma companies, but prevents us, the private citizens, from knowing what exactly the state pays for any particular drug.

The Ohio Office of Health Transformation has published an Executive Budget document which indicates that the total rebate to the state is over 50% of the total expenditure for Medicaid drugs. Because the rebate is confidential and negotiated on a company-by-company basis, it is highly likely that the pharma companies will simply take any reduced drug costs out of the rebates. It seems unlikely that they will continue to rebate over 50% of the old cost, when the new cost has reduced their revenues by 10%-15%.

So the Bottom Line? Who knows? There is certainly some potential that the State of Ohio could save money on Medicaid prescriptions. But, to this researcher, it's impossible to tell where or how much.

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