Biotechnology Innovation: Impact of Health Reform and Deficit Control

By Alyson Pusey, BIO.

With many governors around the country facing budget shortfalls, “the action is all in the states” in terms of health care cuts and cost-savings solutions, according to panelists participating.

The current fiscal environment has forced cash-strapped states to look at their Medicaid programs for ways to rein in costs, and according to panelists, state lawmakers will continue to do so for the foreseeable future.  For example, as a result of the Affordable Care Act (ACA), Medicaid managed care plans can now enjoy the drug rebates that traditional state-run fee-for-service plans have enjoyed for years.  Because the ACA through rebate expansion provided states the incentive to shift their Medicaid beneficiaries to managed care plans, more and more states are using this as a lever to control costs.

Drug costs can also be reduced under the Medicaid managed care approach, and managing utilization is key according to Thomas Johnson with the Medicaid Health Plans of America.  Referencing a recent report issued by the Pharmaceutical Care Management Association (PCMA) that showed Medicaid pharmacy could save more than $30 billion by switching to managed care, Johnson referred to traditional fee-for-service plans as the “largest unmanaged pharmacy benefit in the country.” As more states move beneficiaries into managed care plans, biotechnology companies should continue to monitor state Medicaid formularies and utilization management policies (such as prior authorization) that could impact access to their products.

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