Baker Outlines Steps To Lower Medicaid Drug Prices

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It's an eye-popping number: $1.9 billion. It's what Massachusetts spent last year on drugs prescribed to patients covered by MassHealth, and it's nearly double what it was in 2012.

Gov. Charlie Baker’s budget for the coming year includes a plan to disrupt the trend, a move he says will save $80 million.

It starts with direct price negotiations. Baker says the proposal is aimed at 20 drugs pending approval or recently approved by the FDA.

"It affects a very small number of drugs," Baker said during a budget briefing at the Massachusetts State House. "They happen to be a small number of drugs that have very, very, very big prices on them."

Drugs that cure hepatitis C are priced at $84,000 and up for the full course of treatment. Federal law requires that pharmaceutical companies give Medicaid a 23.1 percent rebate, but some drug pricing analysts question whether very expensive drugs are worth even the discounted rate. Baker says he wants outcomes-based contracts for some of these drugs.

"There really isn’t a process for determining what an appropriate price is for a lot of these new drugs," Baker said. "Yet there is a process for determining a price for almost everything else that Medicaid pays for."

Negotiations are the first step in Baker's strategy for securing concessions from drug makers. The fourth and final "tool" would be possible prosecution using state consumer protection laws, as outlined below:

(Courtesy of the Baker administration)
(Courtesy of the Baker administration)

MassBio, which represents more than 1,100 life sciences companies, issued a statement challenging Baker’s proposal just minutes after the governor's budget briefing.

"Governor Baker’s proposal to force certain drug manufacturers to pay additional, supplemental rebates on incredibly effective drugs that MassHealth deems too expensive sends a message across the industry that government is going to punish success and that only it can be the final arbiter of drug pricing," said Robert Coughlin, president and CEO of MassBio.

Baker was asked if he worries that challenging drug prices will hurt job growth in the life sciences sector. He defended the state’s record of support for the industry.

"Massachusetts for many years has made a big investment in the life sciences," Baker said. "It’s really important, the discovery really matters."

Consumer advocates agree, but say some of those important discoveries are just not affordable for patients, their employers and state government. Health Care for All executive director Amy Rosenthal says Massachusetts has a longstanding tradition of shared responsibility in health care.

"Consumers have stepped up, businesses have stepped up, so have hospitals and insurers. It’s time that pharma does their fair share," Rosenthal said.

Massachusetts is one of a small but growing number of states stepping up pressure on the industry. In California, Gov. Gavin Newsom signed an executive order in his first week on the job that authorizes negotiations for virtually all drugs purchased by the state. New York passed a law in 2017 that’s similar to Baker’s proposal. It's not clear yet, using the New York experience, whether Baker's projected $80 million in savings is realistic.

"What is clear is that New York has succeeded in calling attention to this question," said Washington University associate law professor Rachel Sachs. "They've succeeded in making patients and other actors aware of how this problem affects not only private insurers and people with their out of pocket costs, but is also affecting states and states' ability to provide services that they need for all of their citizens."

This is not Baker's first attempt to reduce MassHealth drug spending. The federal government rejected a proposal last year that would have let Massachusetts exclude expensive drugs that couldn't show they worked. Medicaid is required to cover almost all drugs. Baker is not proposing to exclude any in his current plan so he would not need federal approval.

Tom Barker, a health care attorney at Foley Hoag, says Baker's four-step plan may create the leverage he's seeking.

"It certainly tilts the playing field more in favor of the state than exists right now," Barker said.

But pharma could find grounds to challenge state intervention in drug prices, Barker said, and Baker may face other obstacles.

"There certainly are political risks if the manufacturer just decides they’re not going to sell their drug in Massachusetts," said Barker, who was general counsel for the U.S. Department of Health and Human Services under President George W. Bush.

That risk is a ways off. First Baker must persuade the House and Senate to support his drug price negotiation proposal. A spokeswoman for Senate President Karen Spilka says the Senate will likely file something similar to help move this issue forward.

This segment aired on January 24, 2019.


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Martha Bebinger Reporter
Martha Bebinger covers health care and other general assignments for WBUR.



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