What are the key differences between Medicaid and other payer spaces from a pharmaceutical manufacturer perspective?

Many of our clients are pharmaceutical industry professionals working to increase access for Medicaid members to drugs, devices and therapies. These clients include manufacturers, PBMs and other organization types. The article below is based on our experience working with professionals who have successfully navigated this space. Concepts have been simplified for clarity.

Reading time: 7 minutes

Intended Reader: Pharmaceutical manufacturer sales executives and marketing teams

Key Topics: The state by state nature of Medicaid programs, How PBMs are different in Medicaid, Variation across P&T committees

  The State-by-state Nature of Medicaid Programs

One of the first differences pharmaceutical professionals notice is the uniqueness of each state Medicaid program. While there are national dynamics in play with some of the larger rebate programs, each state has a large degree of control over its coverage and reimbursement policies.  

The main variables for a given state market include:

1. Fee-for-Service– How does the state handle drug coverage for members who are not in a managed care plan? Are some drugs covered under FFS but others are not?
2. Managed Care– What responsibility and authority do health plans operating in the state have for pharmacy benefits? For plans that are part of national brands, how centralized are those decisions?
3. Collaborative Care Models– In recent years, some states have implemented these models. In these models, benefit decisions are often made by a board. Examples include CCOs in CO and WA.

State laws and regulations– Each state will have a different set of regulations on how coverage decisions are made, benefit categories products will be assigned to, and how marketing and communications can be done for members about pharmaceutical benefits.

Use of Pharmacy Benefit Managers  in the HHS Space

While pharmacy benefit managers (PBMs) are not unique to the Medicaid payer space, recent trends have shown the importance of understanding the impact the state government context has on PBM activities.

There are 3 key considerations for manufacturers evaluating the role of PBMs in Medicaid:

1. The PBMs goal of conserving public funds– Since Medicaid is funded with both federal and state tax dollars, spending on pharmacy has a high degree of visibility. This is most apparent during the annual budget process in a given state. There is generally more scrutiny on PBM activities in the Medicaid space because of the ongoing need to show cost savings with public funds.
2. The expanded scope of PBMs in the Medicaid space– Compared to PBMs in other payer spaces, Medicaid PBMs often take on extensive program management scope, including clinical drug reviews for states to inform decision-making (i.e., states outsourcing some P&T-type functions to PBMs).  Medicaid PBMs also negotiate Medicaid supplemental rebates.
3. Recent concerns around transparency – While states have increased reliance on PBM services in recent years, there has also been some scale-back in certain state markets. This retraction is largely over spread pricing issues. There is a renewed call for transparency in PBM operations, and a new political focus on contracts.

Variation in  Structure and Operation of P&T Committees 

Federal law requires each state to have a P&T committee if the state wants to operate a Preferred Drug List (PDL). Each state must include physicians and pharmacists on the committee- but beyond this general requirement, each state can set its own procedures and schedules for the activities and decisions of the committee.

While states must cover any drugs on the federal Medicaid rebate program, coverage for other drugs is up to each state (or health plan if the state has delegated this to managed care). There has been a trend towards adopting more uniform PDLs for specific drug classes (in 2018, 14 state Medicaid programs had a uniform PDL)^[1]. Some states have also moved towards streamlining medical neccessity criteria with uniform clinical protocols.^[2]

While these trends toward standardization have been observed, wide variation by states is the norm.

Some states require utilization controls (such as prior authorization) for all new drugs before a P&T committee develops specific rules. Some states have rapid evaluation processes, but others have extensive protocols that can include pilots, meta-analyses and extensive expert review. These processes range from three months to one year for consideration of new drugs or newer / improved coverage for an existing drug. Like all things government, there is a political nature to the coverage and pricing in many Medicaid pharmacy programs that needs to be taken into account when addressing market access issues in a given state. In many states, the level of influence that the independent pharmacists association exerts can be the difference between coverage, or limited coverage with extensive controls. The role of advocacy organizations whose populations are impacted by your product is also often significant.

How You Can Address the Challenges and Complexities of the State Medicaid Pharmaceutical Environment

Besides your own research into this topic, there are a few key tactics that can help you overcome some of the common challenges related to improving market access in Medicaid markets. We assist clients with each of these strategies, and are happy to have a conversation anytime. If our services and expertise are a fit for your needs as you develop or execute your strategy, engaging with us is a simple process. If we are not the right fit, we are happy to make a referral to another firm who may be.

1. Train your account teams on the details of each state Medicaid program they call on. Knowing the fundamentals of each state program is critical. Most teams used to the commercial space are initially unaware of this need in Medicaid, and then quickly become overwhelmed by the learning curve.
2. Ensure your sales decks and messaging are aligned with the unique values and priorities in the Medicaid payer space. Telling the right story to a Medicaid audience is completely different than the normal narrative for commercial and Medicare Advantage audiences. Your sales collateral needs to account for the unique needs and perspectives of Medicaid program decision makers.  
3. Evaluate what your traditional government affairs approach can and cannot do to help in the Medicaid space. Many manufacturers have a government affairs presence in multiple states. However, traditional government affairs approaches are often insufficient because of the complexity of players, advocates, and the economics of Medicaid financing.
4. Set realistic expectations of timelines in your sales planning– Increasing access for a drug in the Medicaid space can take years. While the volume of members in the Medicaid space can drive significant revenues, there is usually a significant time investment, sometimes multiple years, before favorable coverage policies are fully realized. If you do not set appropriate expectations internally, you will create disruption and confusion in your sales organization.

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