Why Medicaid Recipients May See More Generic Drugs in Their Cabinets

Texas won’t tell state senators how much they get back from drug companies and name-brand drugs could be costing taxpayers millions of dollars each year.

By Alain StephensAugust 2, 2016 10:05 am| , ,

Anyone who does regular grocery shopping knows that in many cases, you pay for the name. From bologna to fabric softener, it’s usually cheaper to go with the generic over the name-brand.

That adage is definitely true with prescription medicine.

Brad Delaney, a pharmacist at Nau’s Enfield Drug in Austin, breaks down just how much more those name-brand prescriptions drugs can cost be compared to their no-name counterparts. Lipitor is $554, while its generic costs $14. Similarly, Diavan rings up at $612, and its generic is only $48.

“As you notice there is a common theme,” Delaney says. “For the most part, it’s almost always going to be the same thing.”

For most people using private insurance, those name-brand prescriptions are simply off the table. Private insurance won’t cover them. But if you are one of the state’s nearly four million Medicaid recipients, you are more likely to receive name-brand drugs compared to those using private insurance.

Most Medicaid recipients rely on managed care organizations – they control what type of health care patients receive, but they don’t determine what drugs a patient gets. That’s left to the state, which makes deals with big pharmaceutical companies to get rebates for drugs.

Jamie Dudensing with the Texas Association of Health Plans represents both private insurance and managed care providers. The association ran a study to see if managed care organizations could do a better job with picking drugs than the state – and it came out with some interesting findings.

“So there’s two things: The study found the strategy of choosing price with drug mix and generics first is a better strategy over rebates, and that health plans more effectively do that strategy,” Dudensing says. “That would basically create $100 million in savings in state tax dollars per year.”

With the potential to save the state hundreds of millions of dollars, the idea’s understandably raised some eyebrows.

One of the lawmakers eyeing the findings is Texas Sen. Charles Schwertner. He’s the chairman of the Senate Health and Human Services Committee and a pharmacist by trade. He wanted to see how much money the state was currently saving with their rebate program. He asked the commission for those numbers – and their response was no.

“They told us that we couldn’t have specifics about the rebates available at the federal level and state level,” Schwertner says. “I thought that was odd for the chairman of the health committee for the Texas Senate (not to get) the information necessary to devise a proper Medicaid prescription drug benefit plan.”

The Health and Human Services Commission said those rebate numbers were proprietary information, meaning it’s a trade secret – and by law, they don’t have to hand it over, not even to a lawmaker.

Ken Lawson, a professor of pharmacy at the University of Texas at Austin, has some ideas about why that information would be so secretive.

“One, it’s possible that (it) would discourage participation by some pharmaceutical manufacturers – the second thing is that since it would essentially disclose a lot of pricing information it could affect the competitive nature of the pricing arrangements,” Lawson says. “If you know what your competitor’s price is maybe you wouldn’t bid so low, or offer as big a rebate.”

But Schwertner still needed that information. The Texas Attorney General’s office got involved, and in the end agreed with the senator. That rebate information will now be available for legislative analysis. It’s too early to say what will come out of that info – but it could mean Medicaid recipients could see more generic medicine in their cabinets.

Story produced with help from Hannah McBride.