Court Upholds State Medicaid Formulary
Gongwer News Service, April 6, 2004
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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
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
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
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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