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YELLOW SHEET Office of the State Auditor of Missouri |
June 28, 2002
Report No. 2002-48
State Medicaid program may pay too much for prescription
drugs and reimburse pharmacies more than
necessary
Missouri�s Medicaid outpatient
prescription drug costs have more than doubled in the last 5 years and totaled
$770 million in fiscal year 2001.� This
audit focuses on the Division of Medical Services� efforts to reduce
prescription drugs costs.� Auditors
found Missouri has not been as proactive as other states with certain containment
programs, such as preferred drug lists or prior authorization.� The following highlights our findings:
Preferred drug lists help
other states save money
Many states are now following
practices of most employee health insurance plans in using preferred drug lists
to reduce costs.� Physicians who want to
prescribe drugs not on the list have to seek prior approval from the Medicaid
program.� Michigan and Florida officials
estimate these lists will save annually $80 million and $150 million,
respectively.� Legislation just passed
in Missouri�s 2002 session allows the division to establish a preferred drug
list by January 2003, but division officials predict, in the end, the state
rule making process will block its implementation.� (See page 5)
State prior authorization rules more complicated then
federal
Division officials have not
placed many drugs in prior authorization status in the last 5 years, partly due
to restrictive state rules which exceed federal requirements.� Drugs in this status require a physician
seek Medicaid program approval before dispensing them, which often saves costs
by resulting in fewer unnecessary prescriptions.� State rules require Missouri-specific clinical and therapeutic
analysis before placing a drug in prior authorization.� Federal law only requires a state plan to
respond within 24 hours of a request and dispense a 72-hour emergency
prescription.� In January 2002, division
officials tried to place more drugs in this status, but were blocked from doing
so.� (See page 6)
Outdated pharmacy
reimbursement rates raise costs
Each state Medicaid agency
determines how pharmacies are reimbursed for acquiring and dispensing drugs for
Medicaid recipients.� One way Missouri
reaches this price is to use the average wholesale price for a drug less 10.43
percent.� But Missouri has not changed
this percentage decrease since 1991 and 19 states use a higher percentage
decrease than Missouri.� For example, a
Missouri pharmacy would receive a $119.66 reimbursement from Medicaid for a
month�s supply for the 20 milligram version of Prilosec�, whereas pharmacies in a state with a 14 percent
decrease would receive $115.05 for dispensing the same supply.� Overall, if Missouri changed its percentage
decrease from 10.43 percent to 14 percent, division records estimated annual
savings of $16.4 million.� (See page 7)
Lower reimbursement rate on
some drugs could save $1.5 million
Missouri pays more than necessary
on 437 drugs dispensed intravenously to at-home or non-hospitalized chronically
ill patients.� The overpayment occurs
because division officials have not timely implemented new dispensing fees for
these drugs which would allow providers to be reimbursed using more accurate
drug prices.� In May 2000, the federal
government provided more accurate average wholesale prices for these drugs,
with some prices being 80 percent less than previous prices.� Our calculations indicate the state could
have saved an estimated $1.5 million ($2 million in drugs costs less $500,000
increase in dispensing fees) on the $8.4 million spent on these drugs in fiscal
year 2001 if the more accurate prices had been used. �Division officials believe any costs savings from the more
accurate drug prices would be completely offset by the higher dispensing fees.� (See page 9)
State to pay pharmacies the
nation�s highest dispensing fee to offset new tax
Legislation �passed in the 2002 session nearly doubled the
dispensing fee paid by the state Medicaid program to pharmacies.� The fee increase to $8.04 per prescription
from $4.09 would rank as the nation�s highest.�
On average, state Medicaid programs paid a $4.27 fee in 2001.� This increase offsets a new 2 percent
pharmacy provider tax, also passed in the 2002 session, which would help the
state obtain additional federal Medicaid matching funds.� Pharmacies would pay about $55.4 million
with the new tax, but then receive about $60.4 million from the state in higher
dispensing fees.� It is uncertain if the
federal government will agree to match the tax revenues and the state
legislation is not yet signed into law.�
(See page 10)
New program director
appears to have conflict of interest
The Department of Social
Services hired a pharmacy program director in October 2001 who previously
worked as a lobbyist for the Missouri Pharmacy Association and continues to own
at least one pharmacy.� Department legal
staff determined hiring this person did not violate state conflict of interest laws.� However, an appearance of a conflict still
exists because of the director�s continued financial interests in the pharmacy
industry and his new position�s influence over policy or legislative changes
effecting the industry.� (See page 15)
