WSJ Examines Florida Medicaid Formulary Program
The Wall Street Journal reports that a "novel pact" between Pfizer Inc. and the state of Florida, in which the drug maker will offer cost-cutting "disease management" services to Medicaid patients in exchange for having its products placed in the state's new Medicaid formulary without discounts, has begun "reverberating in other states and among other drug makers." Under the agreement, which state lawmakers established earlier this year, all of Pfizer's drugs will be placed on the state Medicaid program's list of recommended drugs with no discount to the state; other drug makers "generally promised rebates that equal price cuts of at least 6%" to have their drugs approved for the list. In exchange, Pfizer will cover the cost of hiring nurses to monitor the care of tens of thousands of Florida Medicaid beneficiaries, "especially about 12,000 high-cost ones," encouraging them to take medicines "dutifully," follow diet and exercise regimens and have regular doctor visits. Pfizer has promised that the program will save Florida's Medicaid program $33 million over two years, and is "so confident" in its projection that, if those savings do not materialize, it has promised to pay the state a sum "about double" what it would have had to offer in "price concessions" to enter the formulary. Florida faces a $650 million shortfall in its $9.7 billion Medicaid budget for the fiscal year that began on July 1, with "spiraling" drug spending serving as a "major culprit," the Journal reports.
Pfizer has "won a key advantage by getting all of its drugs" on the Medicaid formulary in Florida, which has the largest Medicaid market after New York and California. "Now, all a physician in Florida needs to remember is if it's a Pfizer drug, it's covered under the formulary," Andrew Knudsen, director of pharmacy services for the University of Florida's Shands Hospital in Gainesville, said. Additionally, the agreement may protect Pfizer from government price controls, the Journal reports. Drug companies fear that "even modest compromises" on pricing could "erode" their "freedom" to price drugs "at a premium."
Pfizer's proposal "is controversial," and the company has "fractured the united front the industry used to fend off formulary laws in the past," the Journal reports. Moreover, many health experts are "doubtful the approach will save much money -- or even that its effects can be measured." Harvard Medical School Professor Stephen Soumerai said that "trying to measure results by looking at how the highest-cost patients fare could give a false impression of success, because the law of averages suggests that the cost of their care is likely to fall anyway." The Journal reports that the deal marks a "grand experiment with implications well beyond one state and company," and, if successful, other state and federal lawmakers "struggling to extend prescription-drug benefits to the elderly without busting budgets" may "embrac[e]" it. Uwe Reinhardt, a health care economist at Princeton University, said, "If in a year from now Florida is successful, [similar programs] will go like wildfire through the landscape" (Gold et al., Wall Street Journal, 7/9).