The state will cut prescription drug costs in Medicaid by limiting patients to mostly generics or brand names for which the state gets a rebate.
Serious shortfalls in the Medicaid budget have pushed the state to adopt limits similar to those used by more than 40 states and major insurers such as Blue Cross and Blue Shield. The change is expected to yield about $90 million a year in savings, with the state's share reaching $23 million to $30 million. The federal government pays most Medicaid costs.
The move comes after years of elected leaders' resisting limits on drugs under pressure from the pharmaceutical industry. Until recently, lawmakers refused to allow a preferred drug list. Drug companies, which employ thousands of state residents, have contributed generously to legislators' campaigns.
"I think we've been very sensitive to this issue mainly because the drug industry is such a large employer in North Carolina," said Sen. Bill Purcell, a Laurinburg Democrat and a retired physician who helped write the state's health budget.
"I think in an ideal world, you won't do this," he said of establishing a preferred drug list. "It's better than some other things we can do."
Advocates for people with mental illnesses fought the change, saying that moving people off medications could lead to more hospitalizations.
Legislators looked to voluntary methods to nudge doctors into prescribing less expensive medicines to trim a Medicaid drug bill that tops $1 billion a year. Medicaid, the government health insurance for the poor and disabled, is the fastest-growing item in the state budget.
Last year, pressed by rising costs and the financial crisis, the legislature left a safety valve in the budget for the state Department of Health and Human Services. If the department could not show by June 1, 2010, that it was saving $25 million on prescriptions, the DHHS could institute a preferred drug list.
Safety valve used
"I just made the decision to start early," said DHHS secretary Lanier Cansler. "We were not going to achieve those goals."
In addition to establishing the drug list, the state is going to join a prescription purchasing pool with 11 other states to obtain medicines at lower costs.
Patients won't see an immediate change in their medicine, Cansler said. But patients will see a gradual winnowing of the prescription drugs Medicaid will pay for without prior approval from the state. A physicians advisory group will decide what stays on the list, and drug companies that offer the state rebates will be able to get brand-name drugs on the list.
HIV/AIDS medications are exempt from the list.
Establishing a preferred drug list is long overdue, said Adam Searing, director the N.C. Health Access Coalition, an advocacy group for low-income people.
"I think it will improve care and lower costs," he said.
Having the list will reduce instances where brand name drugs are prescribed in place of generics that work just as well, he said. .
"There's a lot of research out there on what drugs work and which drugs don't," Searing said. "You can help make sure with a list like this that people get the drugs they need and will work, and we're not paying for drugs that are ineffective and cost more than others."
'02 effort failed
Legislators killed a proposed preferred drug list in 2002 after drug companies mounted a no-holds-barred battle to squash it.
Opposition to the drug list was subdued this year, Cansler said. Most groups who opposed it in the past, including the drug companies, realize the state needs to save money, Cansler said, and have offered suggestions for a smooth startup.
But an executive with the national pharmaceutical trade group PhRMA said in a statement the group still thinks the preferred drug list is a bad idea and "defies a long state tradition of looking out for vulnerable patients."
Ken Johnson, a PhRMA vice president, said the preferred drug list "could deny patients the medicines that are most effective for them and ultimately lead to expensive and debilitating surgeries and hospitalizations."
Advocates for people with mental illnesses are worried about the change. Cansler said the department would be careful to make sure that people with mental illnesses get the medicines they need.
"I don't want to change anything that's going to have people ending up in the hospital or the emergency department," he said.
But John Tote, executive director of the Mental Health Association in North Carolina, said that's exactly what might happen when medicines get cut from the list.
The state budget slashed programs for people with mental illnesses, and Tote said the preferred drug list was like kicking the third leg off a stool. It's not clear how doctors will get permission to use drugs not on the list, Tote said, and patients could suffer while they adapt to new medicines.
"The toll on physical as well as mental health could be enormous," he said.
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