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Article of Interest - Medicaid

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Bridges4Kids LogoFederal Court Upholds State Medicaid Formulary
Gongwer News Service, April 6, 2004
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Michigan's Medicaid drug formulary - a program to save the state money by requiring drug companies to agree to discount the cost of their drugs to be included on an approved drug list - has been upheld as lawful by the U.S. Circuit Court of Appeals for the District of Columbia.

Similar programs are now used by most states to help control the cost of prescription drugs issued to patients on Medicaid. According to the National Conference of State Legislatures, some 26 states now use similar formularies.

A spokesperson for the Department of Community Health said the formulary program, adopted in 2001, saved Michigan some $40 million in costs just in the last fiscal year.

The decision, Pharmaceutical Research and Manufacturers of American v. Thompson, docket No. 03-5117, upheld an earlier finding by the U.S. District Court for the region. The decision was actually issued on Friday.

The lawsuit actually sued U.S. Secretary of Health and Human Services Tommy Thompson for approving the formulary. The industry group was joined in the suit by the National Urban Indian Coalition and the National Alliance for the Mentally Ill of Michigan.

In the case, Judge Karen LeCraft Henderson, joined by Judges Judith Rogers and Stephen Williams, said a state can "establish a Medicaid prior authorization program in order to secure rebates on drugs for non-Medicaid populations if a state demonstrates, through appropriate evidence, that the prior authorization program will further the goals and objectives of the Medicaid program."

The plaintiffs in the case had challenged the state's approved drug list, saying it denied access by some patients to drugs their physicians might think would work better than those on the state list.

But state officials always said if a physician felt a prescription drug not on the list would work better, then that physician could get authorization for the drug.

And in the decision the judges ruled, "The undisputed evidence establishes that the initiative's prior authorization procedure affords Medicaid beneficiaries reasonable and prompt access to those drugs subject to prior authorization." In cases where an alternative drug is prescribed because of a drug allergy or because a patient has used it for several months, approval is given almost immediately. In other cases, the state can authorize a 72-hour supply of the drug while an authorization request is resolved.

"The available data confirm that in practice the prior authorization requirement has proved neither burdensome nor overly time consuming," the court ruled.

The court also rejected arguments that the program benefits non-Medicaid recipients, through Michigan's EPIC program for the elderly and MOMS program for low-income pregnant women, at the expense of Medicaid recipients.

Unless the court decides to rehear the case, the only appeal is to the U.S. Supreme Court.

T. J. Bucholz, spokesperson for Community Health, said the state was pleased with the ruling. "In Michigan we have been able to use this program to benefit folks on Medicaid," he said.

The decision is unrelated to the state's efforts to win federal approval of the multistate drug-purchasing compact.


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