NASHP Awards Grants to Colorado, Delaware, and Oklahoma to Tackle Rising Rx Drug Prices

The National Academy for State Health Policy (NASHP) has awarded $300,000 in grants to Colorado, Delaware, and Oklahoma to help the states develop innovative policy solutions to tackle high prescription drug prices.

With the support from the Laura and John Arnold Foundation, the funding enables states to explore promising policy approaches to control rapidly escalating drug costs highlighted in NASHP’s Pharmacy Costs Work Group recommendations. Rising prescription drug prices are hitting states hard because states cover the prescription costs of their Medicaid beneficiaries and state employees.

“These grants represent promising administrative models of what states can do right now, outside of the need for legislation or waivers, to address the high price of prescription drugs,” said NASHP Executive Director Trish Riley. “Drug costs have strained state budgets to the point they have been forced to take action. Colorado, Delaware, and Oklahoma are helping lead the way by testing new models to lower the drug cost trajectory.”

These state approaches to control drug prices are among several occurring nationwide. On Monday, Oct. 9, California Gov. Jerry Brown signed Senate Bill 17 into law, which requires drug manufactures to give advance notice and justification for significant price increases.

The grants to the three states will fund the following state approaches:

Colorado will develop a new payment system for physician-administered drugs:
Physician-administered drugs (PADs) are costly prescription drugs, such as chemotherapy and other specialty drugs, that are delivered by intravenous infusion or injection in clinical settings. Developing appropriate payment methods for drugs administered by physicians presents a challenge to states due to a lack of information about how much physicians actually pay for these drugs. Colorado has relied on available price information to establish PAD payment rates, including average sales price and wholesale acquisition costs. However, it is not known how closely these prices reflect what providers actually pay in Colorado. To better calculate payment rates, Colorado will conduct an average acquisition cost survey with providers across a range of practices, including small physician offices, clinics, and hospitals. The information collected in the survey will allow Colorado to develop a new payment model similar to the average acquisition model that it currently uses for pharmacy-dispensed prescription drugs. That pharmacy payment methodology has yielded savings exceeding 5 percent and savings are also expected from this new approach with PADs.

Delaware’s agencies and hospitals will maximize savings with a shared preferred drug list:
States have historically used preferred drug lists (PDLs) to strengthen their negotiating power with drug manufacturers. Delaware plans to increase its purchasing power by creating a common PDL across state agencies and hospitals for selected categories of drugs. Partners in this innovative, collaborative approach include the Delaware Division of Medicaid and Medical Assistance, the Delaware Statewide Benefits Office, the Delaware Department of Correction, and major hospitals. The partnership’s first task will be to identify the drug categories that promise the most savings. The goal is to lower the net cost per patient, per year for all categories included in the common PDL by 1 percent in the first year, and by 5 percent by the second year.

Oklahoma will develop a value-based purchasing agreement:

Value-based purchasing, which ties provider payments to quality and outcomes rather than volume, has been a driving principle in payment reform. Innovators are now applying alternative payment methodologies (APMs) to prescription drug purchases. One APM approach is a value-based payment contract between payers and manufacturers like the one recently negotiated between Medicare and Novartis for the gene therapy drug Kymriah (tisagenlecleucel). Under this agreement, the Centers for Medicare & Medicaid will pay for the drug only if patients benefit from the medication by the end of the first month of treatment. Oklahoma is working to be one of the first state Medicaid programs in the nation to enter into a value-based purchasing agreement with a manufacturer. It is currently working to identify the most appropriate drug to move forward with, using this approach, before entering into contract negotiations.

These three states were selected through a competitive application process as part of NASHP’s State Drug Spending and Pricing Policy Initiative through its Center for State Rx Drug Pricing. NASHP will provide technical and strategic assistance to the three states as they implement their policies, and will share outcomes and lessons learned with other states. The grants continue through January 2019.

NASHP invites all states interested in learning more about the wide range of policy responses to address rising drug costs to explore its Center for State Rx Drug Pricing for model legislation, white papers addressing key aspects of legislative strategy, a state legislation tracker, and more resources.