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 Article of Interest - Medicaid/Court Cases

Court Upholds Michigan's Medicaid Prescription Drug Program

from Gongwer News Service, December 14, 2002
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A prescription drug preauthorization and rebate program that state officials say saves millions of dollars a year in the Medicaid program has been upheld by the Court of Appeals.   The program limited doctors to prescribing only certain medications unless they obtained prior authorization from the state.


The court said the trial court erred in issuing an injunction against the program, announced over a year ago, requiring drug manufacturers to rebate a portion of the cost of drugs provided to the state for Medicaid patients.   The policy requires physicians to obtain prior authorization to prescribe medications not on an approved state list in order for the state to reimburse pharmacists for the cost of drugs provided under various health care plans, though preauthorization does not apply if the drug manufacturer paid the state an additional rebate.


The Pharmaceutical Research and Manufacturers of America, representing drug companies which make over 75 percent of the brand name drugs in the country, and mental health advocates quickly challenged the policy that several other states were examining as they also sought to curb prescription drug costs.


Community Health Director Haveman said he was pleased with the decision on a program he said was carefully designed to meet patients' needs and save taxpayer funds.   "The most important factor in this initiative is that doctors are not limited to prescribing certain drugs.   If the drug is medically necessary it is still available.   If a less costly drug meets the medical need, it is available without prior authorization."


He said the program cuts costs by $850,000 per week in programs serving senior citizens, Medicaid recipients and infants.


Preauthorization was not required for drugs on a list that was developed by a committee of physicians and pharmacists, either because the drugs were deemed medically necessary or the companies agreed to the rebates.


The drug manufacturers and mental health advocates, including the Alliance for the Mentally Ill, argued the program was unconstitutional and endangered patients' lives by restricting access to needed medications.


But the per curiam opinion (Pharmaceutical Research and Manufacturers of America, COA docket No.) by Judges Jane Markey and Mark Cavanagh and former Supreme Court Justice Robert Griffin found the Department of Community Health was authorized by law to implement the policy.


"In the absence of a specifically defined legislative limitation, when the DCH is delegated the responsibility of establishing and administering health care programs, it must also be accorded the concomitant powers to implement policies that promote the endeavor, including preauthorization and drug rebate policies," they said in permanently dissolving the injunction that had been issued against the program.   The program was allowed to go into effect in February when the Court of Appeals lifted the injunction while it considered the case.


The court said an express grant of authority was not needed, and that the department retained broad authority to administer the program, and noted that for non-Medicaid programs such as the EPIC program for the elderly, authorization was specifically contained in appropriations bills.


The court sent the matter back to the Ingham County Circuit Court, which had indicated it did not find authority for DCH to implement the program, for a full ruling on the merits of the case.


Jan Faiks, spokesperson for the drug manufacturers association, was unavailable for comment late Monday.


Susan McParland, attorney for the Michigan Association of Children with Emotional Disorders, told the Associated Press a decision on an appeal was not yet made.   "I'm disappointed because of what's at stake here. We know so many of the consumers are being injured because of these policies," she said.


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