Georgetown University Health Policy Institute The Future of Children’s Health Coverage How Medicaid About this Series and CHIP Shield This issue brief is the third in a series of papers from Georgetown University Center for Children and Families on the future of children’s health coverage. Other briefs in the series include: Children from the The Future of Children’s Coverage: Children in the Marketplace Focuses on ways to improve marketplace coverage and the associated financial assistance for children. Rising Costs of Fulfilling the Promise of Children’s Dental Coverage Focuses on pediatric dental coverage and ways to improve children’s Prescription oral health. Drugs KEY FINDINGS by Jack Hoadley and Joan Alker zz Nearly a quarter of U.S. children use at least one prescription drug a month, most commonly treating such conditions as asthma, attention deficit hyperactivity disorder, and infections. Medicaid guarantees that most enrolled children who need drugs receive them without Third in a series of briefs on the future of any financial barriers. children’s health care coverage zz Drug costs are projected to rise faster than overall health July 2017 costs, which themselves are projected to continue rising faster than general inflation. Although Medicaid children are generally protected, cost increases place fiscal pressure on the state and federal governments that pay for the drugs. zz Preferred drug lists and prior authorization can help states secure price discounts, but an effective process for exceptions and appeals is necessary to ensure access. zz Price discounts achieved through Medicaid’s drug rebate program have saved states and the federal government billions of dollars in purchasing prescription drugs, but that program does not address all sources of high drug prices. The Medicaid rebate program should be extended to the Children’s Health Insurance Program. 2 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Prescription drugs are critical to maintaining good The good news for children with Medicaid coverage health for many children, whether for chronic is that they were shielded from these price conditions, such as asthma or attention deficit increases. Most families with Medicaid coverage hyperactivity disorder (ADHD), or acute ailments such can fill their EpiPen prescriptions free of charge, as ear infections. For a smaller set of children, more without a copayment. Others with higher incomes serious conditions such as cancer or HIV/AIDS require and health coverage through CHIP may face a more extensive care that typically includes costly nominal copayment—in most states no more than drug treatments. Medicaid and the Children’s Health $5. But they are also protected from the increases Insurance Program (CHIP) offer critical support for in EpiPen’s price because the copay is fixed. By low-income children in any of these circumstances by contrast, some families with commercial health protecting them from rising drug costs. Most children insurance may have cost sharing in the form of enrolled in Medicaid are totally protected from incurring coinsurance and thus pay more every time the costs to get the drugs they need, and the remaining price increases. Furthermore, families with large children with Medicaid or CHIP coverage have minimal deductibles in their health plan or without insurance out-of-pocket drug costs. at all may have to pay full cost of $608 for their EpiPens. Medicaid or CHIP coverage is thus a The Example of EpiPen critical protection for the children enrolled in these A notable example is EpiPen, a drug used to treat programs. Yet the cost of EpiPens and other drugs severe allergic reactions, such as those triggered by should be addressed for all children, including those certain foods. EpiPen, which delivers epinephrine who do not benefit from the protections available through an injection device, made headlines recently from Medicaid and CHIP. when Mylan, its manufacturer, raised the list price of a two-pen package to $608. The new price was more Protection from drug costs is an important feature than six times the price when Mylan acquired the of Medicaid. Still, some children enrolled in product from Merck in 2007. An estimated 3.5 million Medicaid and CHIP may face challenges getting the prescriptions were written for EpiPens in 2014,1 and medication they need because of prior authorization Medicaid covered about one of every five of these requirements and other controls that states or prescriptions.2 managed-care organizations (MCOs) establish. Some Basic Facts: Insurance Coverage and Drug Use for Low-Income Children In 2015, 95 percent of all children had health 4 percent used three or more drugs. In 2009, the most insurance coverage, and 36 percent had coverage recent data publicly available, children with Medicaid through public programs, primarily Medicaid (37 coverage used an average of 0.5 prescriptions per million) and the Children’s Health Insurance Program, benefit month—or 6 prescriptions a year. The cost or CHIP (9 million).3 Most other children were to Medicaid was $31 per month.5 These averages covered privately either through employer-sponsored suggest that a majority of children do not take insurance or individual coverage, such as plans prescription drugs on a regular basis. Indeed, purchased through the marketplaces created by the in 2014, only 14 percent of children covered by Affordable Care Act. Medicaid or CHIP had a health issue for which they regularly took prescription medication for at least Nearly one in four children in the United States (23.5 three months.6 But many children do need drugs percent), regardless of insurance status, used at least regularly for chronic health conditions, and many one prescription drug per month in 2009-2012.4 About more need them when acute illnesses strike. 3 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Most Common Types of Drugs Used by multi-race children (13 percent).8 When asthma Children is not well managed, it leads to more emergency department visits, but also has consequences Much of the prescription drug use by children beyond health. (regardless of income) occurs for one of three health conditions (Table 1). For the youngest children, Half of school-age children with asthma missed at especially those under age 6, penicillin antibiotics are least one day of school, and more than half had at the most common.7 These drugs address short-term least some limitation in their daily activities as a result needs, such as ear infections. Many antibiotics have of their asthma. Asthma treatments include both modest costs even without insurance; for example, controller medications that are taken daily to prevent a prescription for amoxicillin might cost between problems and quick-relief (rescue) medications taken $5 and $15. But the need arises with little warning. during an asthma attack. Some evidence suggests Insurance coverage means that cost need not be an that poor adherence to controller medications can impediment to obtaining treatment on a timely basis lead to emergency room visits.9 for these acute illnesses. Among adolescents aged 12 to 19, central nervous Table 1. Most Common Drug Classes for Children system (CNS) stimulants are the most commonly under 18 Years of Age (by the percent of population prescribed drugs. These drugs also treat a chronic with at least one prescription in the drug class, 2009-2012) health condition—ADHD—and are likely to be used throughout the year. ADHD drugs were used by 7.5 Percent of percent of children aged 6 to 17 in 2011-2012 and population with at least one more likely to be used by boys than girls and by non- Drug class prescription in Hispanic white children than either black or Hispanic drug class in past children.10 30 days Bronchodilators (asthma, Children on Medicaid or CHIP are more likely to take 5.1 breathing) ADHD drugs than other children, in part because CNS Stimulants (ADHD) 3.5 these conditions occur more often in lower-income Penicillins (bacterial infections) 3.3 families11 and in part because Medicaid may be making it easier for children to be diagnosed and to Leukotriene modifiers (asthma, 2.0 obtain needed drugs. While issues around the use of allergies) ADHD drugs may mean that some children’s use of Respiratory inhalant products 2.0 these drugs may not be appropriate, more than half (asthma and related disorders) Antihistamines (allergies) 1.7 of children using drugs for emotional or behavioral difficulties had a parent report that the medication Source: Health, United States, 2015. DHHS/CDC/NCHS. 2016 helped the child “a lot,” more so for boys than for (Hyattsville, MD), Table 80. girls.12 One study suggested that children with ADHD For children up to age 11, drugs in the bronchodilators who were treated with medication outscored those class are the most used drugs. These drugs treat who were not treated in both math and reading. asthma and other breathing conditions. Unlike Although the differences in scores are not large, they antibiotics, they are used for chronic conditions. As offer some evidence medication can help students such, many are taken all year long and may be used with ADHD achieve higher grades.13 over a lifetime. Asthma affects 8.5 percent of children and is more common for poor children (13 percent), boys (10 percent), black children (14 percent), and 4 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Drug Classes with the Most Spending on and about one-fourth of children eligible for Medicaid Behalf of Children based on child welfare assistance do so.15 Many of these children used psychotropic drugs (more often While the drugs used to treat infections, asthma, and antidepressants than anti-psychotic drugs) on a regular ADHD are the most common drugs used by children, basis. other drug classes generate considerable spending for Medicaid. Data for 2011 for Medicaid beneficiaries in Other children have health conditions that require managed-care plans managed by Express Scripts, one high-cost drugs. These conditions include HIV/AIDS, of the largest pharmacy benefit managers, highlight childhood cancers such as leukemia, and other the drug classes with the most spending.14 As shown uncommon health conditions. Although these drugs in Figure 1, the top three classes by spending include are taken by relatively few children, some of these the most commonly used drugs: anti-asthmatic drugs, conditions require treatment for an extended period drugs used to treat ADHD, and antibiotics used for or even for a lifetime. In many cases, drugs are quite infections. Other classes with high spending highlight expensive.16 For example, enzyme replacement therapy health conditions for which the number of people may for rare conditions such as Gaucher’s disease, Pompe be lower but costs drive up total spending. Examples disease, and Maroteaux-Lamy syndrome typically cost are drugs for diabetes and mental health conditions. in the range of $200,000 to $300,000 a year. For most The latter class includes both anti-psychotics (taken by of these children, drugs are critical to their survival. those diagnosed with schizophrenia, bipolar disorder, or other related behavioral health conditions) and anti- Spinraza, a drug that received FDA approval in depressants. December 2016 for spinal muscular atrophy, illustrates the challenge faced by high-cost drugs.17 The disease, As described below, use of psychotropic drugs for characterized as the most common genetic cause behavioral health conditions may be inappropriate of death for children, causes weakness and muscle for some children, while other children may benefit. wasting. But the drug’s price of $750,000 for the first Although only about 5 percent of children use some year’s treatment and $375,000 for subsequent years type of psychotropic drug, the share is much higher has proved a challenge for Medicaid programs.18 for certain subgroups. One-third of children eligible for Medicaid based on disability use one of these drugs, Figure 1. Selected Drug Classes with the Most Spending for Medicaid Children and Adolescents, Ages 0-19 Attention Disorders 18.0% Infections 11.8% Diabetes 5.1% Mental and 4.9% Asthma Neurological 27.0% Disorders Allergies 4.0% Seizures 3.1% Skin Infections 2.3% Other 19.7% Contraceptives 2.1% Skin Conditions 2.0% Source: Express Scripts, 2011 Drug Trend Report. 5 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Protecting Children from High Drug Costs Medicaid and CHIP provide covered children with But coverage restrictions vary by state; for example, a comprehensive health benefit package, which several states currently do not cover OTC proton includes prescription drugs. CHIP covers about 9 pump inhibitors, such as omeprazole. And many million children, far fewer than Medicaid. States can states do not cover OTC emergency contraceptives. choose to operate a free-standing CHIP program A child needing a drug from a class that is excluded independent of Medicaid, enroll CHIP kids in their should still receive that drug as a result of EPSDT Medicaid programs, or use a combination of the requirements. Coverage of OTC drugs generally two. States that enroll children in Medicaid provide requires obtaining a prescription and may include those children the full benefits of the program. By other paperwork (such as prior authorization) or limits contrast, those using a separate CHIP program do (such as generic products only). not provide the guarantee of a defined benefit, and they may offer a less comprehensive benefit and lack Limits on Cost Sharing Medicaid’s cost-sharing protections.19 A key for establishing effective access to drugs, particularly for those with limited resources, is Several elements of Medicaid and CHIP are vital for eliminating or minimizing out-of-pocket costs so protecting children from drug costs. These include that they do not limit access. In most insurance the coverage mandates established by Medicaid’s programs, cost sharing—in the form of flat Early and Periodic Screening, Diagnostic, and copayments or percentage coinsurance—are Treatment (EPSDT) benefit and limits on copayments included to give the insured individual an incentive to and other out-of-pocket costs associated with drug reduce inappropriate use of drugs, such as the use benefits in Medicaid and CHIP. of expensive brand-name drugs instead of equivalent generics or the use of drugs where the clinical benefit Availability of Prescription Drugs as a is uncertain. The theory is that the quality of health Covered Medicaid Benefit care might be improved and costs lowered, but a Critically for children, EPSDT requires that states major 15-year study in the 1970s and 1980s found provide all appropriate and medically necessary that asking individuals to share more costs reduced services needed to address a child’s health their use of both appropriate and inappropriate conditions, even if the particular services are not drugs and other services. Low-income individuals in included in the state’s Medicaid plan.20 Thus, even particular were as likely to skip needed services as if a state were to restrict drug coverage for adults,21 inappropriate ones. Children’s use of outpatient care children should still be able to obtain any drugs decreased as much as 30 percent, depending on their practitioners determine they need as the how much families were required to pay.23 result of a screening and diagnosis. The screening and diagnosis functions under EPSDT also help Prescription drug copayments, in particular, appear to guarantee that health conditions needing drug to achieve savings at least in part from people treatments are identified on a timely basis. However, forgoing needed medications. Older studies on as discussed below, EPSDT protections do not Medicaid drug benefits have shown that when insulate children from such utilization management faced with copays (even 50 cents to $3), people controls as prior authorization. on limited incomes reduced use of both necessary and unnecessary drugs.24 Two studies of children In addition to covering prescription drugs, most with asthma found that higher cost sharing was states cover at least some over-the-counter (OTC) associated with reductions in medication use; drugs.22 These may include analgesics (e.g., aspirin, one also found an association with higher rates of acetaminophen), antihistamines (e.g., loratadine), hospitalization with children aged 5 or older.25 antimicrobials (e.g., bacitracin), gastrointestinal products (e.g., omeprazole, ranitidine), and vitamins. 6 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs A study of health coverage for one employer that out-of-pocket costs, can have a dramatic effect implemented changes to its drug benefit found that on one’s health. When the health consequences of copayment increases resulted in a significant decrease these decisions lead to an emergency room visit or in the likelihood of using ADHD medications by hospitalization, the state’s cost will far exceed the children with ADHD.26 savings from requiring copayments.28 In addition, one study found that higher out-of-pocket Medicaid generally eliminates cost sharing as a barrier health costs for the family as a whole (regardless of for children who need drugs. For most children on insurance status) had an adverse impact on access Medicaid, there is no cost sharing.29 By law, children to care (including drugs) for children. Specifically, an in families that are below 133 percent of the federal increase in costs to the family was associated with a poverty level ($27,159 for a family of three in 2017) higher rate of unmet needs or delayed care due to out- do not incur cost sharing for most of their drugs. In of-pocket costs.27 Insurance coverage for the family practice, only those at higher income levels, including that reduces out-of-pocket costs thus helps reduce those with CHIP coverage and those with insurance access barriers for children. obtained in the private market, may face copays. But Medicaid and CHIP rules limit copays to nominal For conditions such as diabetes and asthma, decisions amounts in most situations.30 to skip a needed drug for any reason, including Managing Children’s Prescription Drug Use Use of prescription drugs for many children is a direct Furthermore, the Centers for Medicare & Medicaid response to their health conditions. Monitoring of Services (CMS) requires states to report on programs their care by their health care providers should ensure that ensure appropriate use of psychotropic drugs by that they are using drugs appropriately. Two situations children; 41 states have specific programs.33 CMS has illustrate the interplay of utilization management with also developed performance measures to assess the the medical needs of patients: behavioral health use of antipsychotic and ADHD drugs for children. conditions and drugs with extraordinarily high costs. Other state initiatives include prior authorization and peer review programs, requirements for informed As noted above, psychotropic drugs may be consent from parents or legal guardians, feedback to prescribed for children more frequently than clinicians on their prescribing practices, and broader necessary. Risks associated with the use of educational efforts aimed at clinicians.34 psychotropic drugs may include weight gain, metabolic disorders, and suicidal thinking; Drugs with extraordinarily high price tags put experts suggest that these drugs are best used budgetary pressure on Medicaid programs to limit as a component of a comprehensive treatment use. The price of hepatitis C drugs, for instance, has plan.31 States often address these concerns by focused attention on this challenge for states, many creating specific requirements when these drugs of which have set tight clinical guidelines, enforced are prescribed. As of 2014, for example, 31 state by measures such as prior authorization, for which Medicaid programs required prior authorization for beneficiaries may receive the drugs. Although children children who are prescribed certain antipsychotic are infected with hepatitis C much less often than drugs.32 Most state prior authorization requirements adults, 0.4 percent of children age 12 to 19 are for antipsychotic drugs targeted children 7 years old estimated to have this condition.35 Similar pressures or younger, but some applied the requirement more are confronting states for other costly drugs (such broadly. as the newly approved Spinraza for spinal muscular atrophy) prescribed for children now or in the future. 7 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Factors Limiting Medicaid’s Protection for Children from Drug Costs Medicaid programs in many states place limits on Some states also apply step therapy requirements their prescription drug benefits. Examples include an where a drug that is less expensive or one that is overall limit on the number of covered prescriptions generally regarded as more effective must be tried per month, a limit on the number of brand drugs per before use of the alternative drug that may work month, and prior authorization restrictions that apply better for the particular patient is authorized. to certain drugs which are not on a preferred drug list Prior authorization and step therapy may be effective (PDL) or which have safety considerations. Although in containing drug costs if they are well designed children are mostly exempt from some measures such and based on clinical evidence.38 Still, the need to as monthly limits, others such as prior authorization obtain prior authorization creates an additional barrier often do apply.36 when prescribers believe a drug that is not on the Although some states set limits on the numbers of preferred list would work best for their patients. Federal prescriptions or those for brand drugs that can be law requires that a request for prior authorization filled each month, most states do not apply their have a response within 24 hours. It further requires limits to children. But in Mississippi, for example, that Medicaid beneficiaries can obtain a 72-hour the limit for children is lifted only if the doctor sends emergency supply of a drug while awaiting prior Medicaid a plan of care.37 authorization and the medication is needed without delay. The reality is that these emergency supplies are States often impose prior authorization requirements not always provided, often because pharmacists are where drug safety or health considerations are unaware of the requirements.39 The right to file appeals involved, as in the case of psychotropic drugs in these situations is designed as a protection for described above. But many states also use prior Medicaid beneficiaries. Some steps have been taken authorization in situations that are more driven by to ensure that beneficiaries know why a prescription economics. A common example, described in more was rejected and their rights around obtaining prior detail below, is the use of a PDL as a means to obtain authorization. For example, a legal settlement in discounts from manufacturers. In these situations, Florida in 2003 in Hernandez v. Meadows established prior authorization is typically required for any drug requirements that included notices to beneficiaries that is not on the list. about their rights.40 The Role of Medicaid Managed Care Increasing numbers of Medicaid beneficiaries Use of PDLs can become more complicated for have been enrolled in managed-care organizations coverage through Medicaid MCOs. Regulatory over the years. In 2013, two thirds of Medicaid requirements issued by CMS in a final rule published children were in managed care.41 In 2016, most in May 2016 and phased in over the next three years states that rely on comprehensive managed care emphasize that Medicaid’s statutory requirements for their Medicaid programs (34 of 39 such states) flow through to MCOs. For example, a plan that had enrolled at least 75 percent of their Medicaid maintains a formulary for drugs must ensure that children in MCOs.42 Overall, for adults and children, off-formulary drugs are available under a prior over half of drug spending (55 percent) was paid for authorization process, including a required timeline by managed-care plans as of 2015, up from just 14 for prior authorization reviews and the availability of percent in 2011.43 emergency supplies of a drug where appropriate. 8 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs In Florida’s Medicaid managed-care pilot in 2007, Some states impose additional requirements on HMO formularies included fewer commonly prescribed the MCOs that use preferred drug lists. The state of drugs on their PDLs than were on the official state list. Washington requires health plans to eliminate prior This situation led in some cases to delayed access authorization requirements for patients who have to needed drugs for patients.44 As part of Florida’s existing prescriptions for drugs in certain drug classes, statewide expansion of Medicaid managed care, including atypical antipsychotics, antidepressants and the state now requires all participating health plans medications for ADHD. Similarly, New York allows a to use a state-mandated formulary for the first year prescriber’s professional judgment to prevail, effectively of a contract.45 More recently, a survey of Florida’s bypassing the prior authorization process for certain pediatricians found that prior authorization requirements drug classes.47 imposed by Medicaid managed-care plans created both paperwork burdens and potential barriers to access for medications needed by children.46 Reducing States’ Medicaid Prescription Drug Costs In 2015, overall personal health care expenditures in spike in spending a few years ago. A second driver of the United States increased at a rate of 6 percent, future cost growth is that fewer brand drugs are losing while prescription drug spending outpaced overall patent protection after 2017, triggering faster growth growth with an increase of 9 percent.48 Historically, drug in drug prices in 2018. spending growth was low in some years as generic In nearly all situations, Medicaid protects children and drugs replaced brand drugs in many drug classes, and their families from bearing the cost of the drugs the high in other years when expensive new drugs came on children take. As a result, they are shielded both from the the market (Figure 2). While the rate of drug spending high costs associated with many drugs that are new to the growth in future years is projected to be lower than the market and from large price increase for older drugs, such 2015 rate, it is still projected to outpace overall health as EpiPen.50 But children can see an indirect effect. High spending consistently over the next decade.49 High- and growing drug costs put pressure on state budgets, cost specialty drugs are expected to be a major driver which can lead to cost-containment measures of the of this higher growth rate. For instance, the high cost of kind described above and create access problems. the new drugs for hepatitis C contributed to a dramatic Figure 2. Comparing Historical and Projected Spending Trends for Drugs and All Personal Health Care, 2009-2025 14% Historical Projected 12% Drugs All Personal Health Care 10% 8% 6% 4% 2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: CMS, National Health Expenditures Data, https://www.cms.gov/Research-Statistics-Data-and-Systems/statistics-Trends- and-Reports/NationalHealthExpendData/index.html. 9 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs The impact of high drug prices as a contributor to discounts come in the form of supplemental rebates health care costs is broadly addressed by federal negotiated in conjunction with placement on preferred law. The federal government requires pharmaceutical drug lists. For example, a manufacturer would offer a manufacturers—as a condition of including their drugs lower price if its drug is included on the state preferred under the Medicaid benefit—to pay a basic rebate drug list and other competing drugs are denied such to the Medicaid program.51 Rebates, however, do placement. Typically, states enforce the PDLs by not apply to separate CHIP programs. These rebates requiring prior authorization for drugs not on the list, create a discount from the drugs’ list prices. Base since states may not deem that a particular drug is rebate amounts are 23.1 percent of the standard price not covered by Medicaid.53 A well-managed PDL uses for brand drugs and 13 percent for generic drugs. the leverage of placing drugs on the list to negotiate price discounts for the state, while maintaining clinical In addition, the rebate is higher in two circumstances. oversight to ensure that the list is adequate to meet the First, for brand drugs, Medicaid is guaranteed the needs of beneficiaries. lowest or best price obtained by the manufacturer in most market transactions by increasing the amount When first created in 1990, Medicaid rebates were of the rebate to match the best discounts obtained by available only for drugs paid for by states on a fee- other commercial payers. By contrast, the Medicare for-service basis. This policy was changed in the program is not guaranteed the best market prices for Affordable Care Act so that manufacturers must now Part D enrollees (including Part D coverage for those pay rebates on drugs purchased through managed- dually eligible for Medicare and Medicaid). care organizations. Like the states, plans can negotiate additional rebates with manufacturers based on their Second, Medicaid is mostly protected from large price use of PDLs. increases through an increased rebate when a drug price rises faster than inflation. The inflation rebate These discounts help the Medicaid program was originally applicable only to brand drugs, but was manage costs. But neither the states nor the federal extended to generic drugs (starting in 2017) by the government are protected from high launch prices Bipartisan Budget Act of 2015. This rebate protects for new drugs. Drugs that enter the market at high state and federal budgets from price increases, but prices impose budgetary pressures on Medicaid. offers no deterrent effect against excessive price As illustrated by hepatitis C drugs or the new drug increases that affect the market more generally. for spinal muscular atrophy, these high prices have led many states to limit access to the drugs in order Collectively, these provisions provide Medicaid with to manage their budgets.54 But even for high-priced substantial discounts that are shared between the drugs, Medicaid is still guaranteed the best prices federal government and the states. In addition, most obtained elsewhere in the commercial market and is state Medicaid programs (but not necessarily separate protected against future price increases. Furthermore, CHIP programs) get even lower prices for selected the federal government shares in the costs of these drugs, beyond the requirements in federal law.52 These drugs with states on an open-ended basis. Conclusion and Recommendations The growing cost of prescription drugs is a challenge and even large increases for some generic drugs. for the health care system writ large, not just for New drugs continue to enter the market with high Medicaid and CHIP. In recent years, we have seen price tags. Even when they offer significant clinical large price increases for brand-name drugs, such advances, these high price tags make broad access as EpiPen, that are well established in the market difficult. 10 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Medicaid protects families from most of these costs of Health and Human Services and the Administrator by guaranteeing that drugs are covered and that of CMS noted their intent to “conduct a full review” out-of-pocket costs are eliminated for most Medicaid of those regulations.55 Access protections in law children and minimized for the rest. CHIP provides and regulations—such as prompt responses to prior most of these same protections. These protections authorization requests and emergency supplies of a and coverage standards must be preserved to ensure drug—are designed to ensure that access to drugs for that children have access to the treatments they Medicaid beneficiaries is not impeded. need. Families with private health insurance are more The rising costs of drugs, with growth rates above vulnerable to high and rising drug costs and need those for other health costs, are a continuing source better protections to ensure access to needed drugs. of pressure on the federal and state budgets that pay A large and growing share of Medicaid children are for Medicaid and CHIP. High prices for specialty drugs enrolled in managed care, meaning that private plans create a particular challenge to programs that seek are charged with managing their drug benefits. There is to manage costs while maintaining access. Although some evidence that management of a drug benefit with Medicaid drug price rebates are a key tool in managing tools such as prior authorization can create obstacles costs, they do not address high launch prices for new to access. These issues point to the importance of drugs—a challenge that is not unique to Medicaid. the recent Medicaid managed-care regulations, which Many of the potential means of addressing launch reiterate the principle that protections in Medicaid prices, such as modifications to the laws governing law flows through to managed-care organizations. In patents and patent term extensions, are beyond the a March 14, 2017, letter to governors, the Secretary scope of Medicaid.56 Recommendations XX Maintain coverage of drugs, including the EPSDT policies that guarantee coverage for children, and elimination of most cost sharing for children—both of which are critical components of Medicaid. At the same time, further steps may be needed to ensure that coverage restrictions are clinically justified and do not restrict access to needed drugs. XX Maintain discounts now available to Medicaid in the form of statutory rebates and extend these rebates to standalone CHIP programs as a critical tool to guaranteeing that these programs get the best available drug prices. Policymakers may also want to consider ways to strengthen the protections against price increases as a further deterrent to excessive price increases. XX Develop solutions in the broader health system to address high launch prices for new drugs, which are a continuing burden for Medicaid programs. XX Preserve protections in the May 2016 Medicaid managed-care rule that ensure access to needed drugs. Furthermore, more steps should be taken to promote compliance by managed-care plans with Medicaid rules: zz Risk contracts should reflect regulatory requirements. zz Plans should have an incentive to comply with EPSDT requirements. zz States should engage with external quality review organizations to ensure appropriate drug access. 11 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs Endnotes 1 A. Coukell, C. Shih, and E. Reese, “Beyond EpiPen: Prices of Express Scripts. It also excluded specialty drugs. A separate Lifesaving Epinephrine Products Soar” (Washington: The Pew analysis using 2009 Medicaid program data for fee-for-service Charitable Trusts, September 22, 2016). Medicaid beneficiaries yielded similar results. This latter analysis was limited to the top ten drug classes for Medicaid 2 K. Young and R. Garfield, “Spending and Utilization of EpiPen beneficiaries of all ages. Among those drug classes, the top three within Medicaid” (Washington: The Kaiser Family Foundation, for Medicaid spending on behalf of children were anti-asthma October 7, 2016). drugs, stimulants to treat ADHD, and anti-psychotic drugs. See 3 J. Alker and A. Chester, “Children’s Health Coverage Rate S. Frazee et al., “2011 Drug Trend Report” (St. Louis: Express Now at Historic High of 95 Percent” (Washington: Georgetown Scripts, April 17, 2012). University Center for Children and Families, October 2016). 15 Medicaid and CHIP Payment and Access Commission, “Report 4 National Center for Health Statistics, “Health, United States, to Congress on Medicaid and CHIP” (Washington: Medicaid and 2015: With Special Feature on Racial and Ethnic Disparities” CHIP Payment and Access Commission, June 2015), available (Hyattsville, MD: National Center for Health Statistics, May 2016), at https://www.macpac.gov/publication/june-2015-report-to- available at https://www.cdc.gov/nchs/data/hus/hus15.pdf. congress-on-medicaid-and-chip/. 5 A. Bagchi, J. Verdier, and D. Esposito, “Chartbook Medicaid 16 “Rare Diseases Treated with Enzyme Replacement Therapy,” R. Pharmacy Benefit Use and Reimbursement in 2009” Harrison, Rare Disease Report, http://www.raredr.com/news/rare- (Washington: Mathematica Policy Research, December 21, 2012). diseases-treated-with-enzyme-replacement-therapy; S. Tribble and S. Lupkin, “High Prices for Orphan Drugs Strain Families 6 Data Resource Center for Child & Adolescent Health, “National and Insurers,” National Public Radio, January 17, 2017; and A. Health Interview Survey-Child and Family Core, NHIS- Smith, “Cashing in on ‘Orphans’: Pharmaceutical Companies Child 2014” (accessed March 22, 2017). Available at www. Like Genzyme Reap Huge Profits Off Treatments for Obscure childhealthdata.org. Diseases,” CNN Money, March 16, 2007. 7 Q. Gu, C. Dillon, and V. Burt, “Prescription Drug Use Continues 17 Food and Drug Administration, FDA Approves First Drug to Increase: U.S. Prescription Drug Data for 2007-2008” for Spinal Muscular Atrophy: New Therapy Addresses Unmet (Hyattsville, MD: National Center for Health Statistics, September Medical Need for Rare Disease, Press Release (December 23, 2010). 2016). 8 Centers for Disease Control and Prevention, “Asthma Facts— R. Weisman, “Hope for Devastating Child Disease Comes at a 18 CDC’s National Asthma Control Program Grantees” (Atlanta: Cost $750,000 a Year,” The Boston Globe, March 28, 2017. Centers for Disease Control and Prevention, July 2013), available at https://www.cdc.gov/asthma/pdfs/asthma_facts_program_ T. Brooks and K. Whitener, “At Risk: Medicaid’s Child-Focused 19 grantees.pdf. Benefit Structure Known as EPSDT” (Washington: Georgetown University Center for Children and Families, June 2017). 9 S. Frazee, “Asthma Hits Medicaid Hardest” (St. Louis: Express Scripts, March 21, 2013). 20 K. Whitener, “EPSDT: A Primer on Medicaid’s Pediatric Benefit” (Washington: Georgetown University Center for Children and 10 L. Howie, P. Pastor, and S. Lukacs, “Use of Medication Families, March 4, 2016). Prescribed for Emotional or Behavioral Difficulties Among Children Aged 6-17 Years in the United States, 2011-2012” 21 Although drugs are by law an optional Medicaid benefit, (Hyattsville, MD: National Center for Health Statistics, April 2014). all states have incorporated drug coverage into their benefit packages. 11 L. Akinbami et al., “Attention Deficit Hyperactivity Disorder Among Children Aged 5-17 Years in the United States, 1998- 22 In 2007 (the last available survey), all states covered at least 2009” (Hyattsville, MD: National Center for Health Statistics, some OTC drugs. A check on coverage in various states August 2011). confirms that coverage of OTC drugs remains common and may still be true in all states. National Pharmaceutical Council, 12 L. Howie, P. Pastor, and S. Lukacs, op. cit. Inc., “Pharmaceutical Benefits Under State Medical Assistance 13 “Understanding How ADHD Medication Affects School Programs,” (Reston, VA: National Pharmaceutical Council, Inc., Performance,” M. Cooney, Study.com, http://study.com/ January 1, 2007). blog/understanding-how-adhd-medication-affects-school- 23 A. Leibowitz et al., “Effect of Cost-Sharing on the Use of performance.html; and R .Baweja, R. Mattison, and J. Medical Services by Children: Interim Results from a Randomized Waxmonsky, “Impact of Attention-Deficit Hyperactivity Disorder Controlled Trial,” Pediatrics 75, no. 5 (May 1985): 942-951; and on School Performance: What are the Effects of Medication?” RAND Health, “The Health Insurance Experiment: A Classic Pediatric Drugs 17, no. 6 (December 2015): 459-477. RAND Study Speaks to the Current Health Care Reform Debate,” 14 These data—the most recent available to break out use by (Santa Monica: RAND Health, 2006), available at http://www. Medicaid children—are limited to Medicaid beneficiaries whose rand.org/content/dam/rand/pubs/research_briefs/2006/RAND_ drug benefits were managed by the pharmacy benefit manager RB9174.pdf. 12 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs 24 National Health Law Program, “Researchers Repeatedly 33 Center for Medicaid and CHIP Services, “Medicaid Drug Find Cost Sharing Harms Medicaid Beneficiaries’ Access to Utilization Review State Comparison/Summary Report FFY 2015 Care and Health Status” (Los Angeles: National Health Law Annual Report: Prescription Drug Fee-For-Service Programs” Program, August 5, 2011), available at http://www.healthlaw.org/ (Washington: Center for Medicaid and CHIP Services, December publications/browse-all-publications/researchers-repeatedly- 2016), available at https://www.medicaid.gov/medicaid- find-cost-sharing-harms-medicaid-beneficiaries-access-to-care- chip-program-information/by-topics/prescription-drugs/ and-health-status#.WP5OhfnyuUk; B. Stuart and C. Zacker, downloads/2015-dur-summary-report.pdf. “Who Bears the Burden of Medicaid Drug Copayment Policies?” 34 Medicaid and CHIP Payment and Access Commission, “Report Health Affairs 18, no. 2 (March/April 1999): 201-212; A. Nelson, to Congress on Medicaid and CHIP,” op. cit. C.E. Reeder, and W.M. Dickson, “The Effect of Medicaid Drug Copayment Program on the Utilization and Costs of Prescription 35 M. Jonas, “Hepatitis C Virus Infection in Children” (UpToDate, Services,” Medical Care 22, no. 8 (August 1984): 724-736; June 2017), available at http://www.uptodate.com/contents/ and C.E. Reeder and A. Nelson, “The Differential Impact of hepatitis-c-virus-infection-in-children. Copayment on Drug Use in a Medicaid Population,” Inquiry 22, 36 No recent source provides a complete compilation of state- no. 4 (Winter 1985): 396-403. specific prescribing limits. Two sources were consulted for 25 P. Karaca-Mandic et al., “Out-of-Pocket Medication Costs and this report, supplemented by review of various state Medicaid Use of Medications and Health Care Services Among Children websites. National Pharmaceutical Council, Inc., “Pharmaceutical with Asthma,” Journal of the American Medical Association 307, Benefits Under State Medical Assistance Programs 2007,” op. no. 12 (March 28, 2012): 1284-1291; and W. Ungar et al., “Effect cit; and Council of State Governments (CSG) Midwest, “Details of of Cost-Sharing on Use of Asthma Medication in Children,” State Limits on Prescriptions for Medicaid Recipients,” available Journal of the American Medical Association Pediatrics, 162, no. at http://www.csgmidwest.org/policyresearch/documents/ 2 (February 2008): 104-110. scriptlimits.pdf. 26 H. Huskamp et al., “Impact of 3-Tier Formularies on Drug 37 “What Mississippi Medicaid Can Do For You!” (Jackson, MS: Treatment of Attention-Deficit/Hyperactivity Disorder in Children,” Mississippi Division of Medicaid, November 1, 2012), available Journal of the American Medical Association Psychiatry 62, no. 4 at https://medicaid.ms.gov/wp-content/uploads/2014/03/MS- (April 2005): 435-441. Medicaid-Overview.pdf. P. Karaca-Mandic et al., “Family Out-of-Pocket Health Care 27 38 M. Fischer and J. Avorn, “Step Therapy—Clinical Algorithms, Burden and Children’s Unmet Needs or Delayed Health Care,” Legislation, and Optimal Prescribing,” Journal of the American Academic Pediatrics 14, no. 1 (January-February 2014): 101-108. Medical Association 317, no. 8 (February 28, 2017): 801-802; A. Fischer, N. Choudhry, and W. Winkelmayer, “Impact of Medicaid 28 C. Roebuck et al., “Increased Use of Prescription Drugs Prior Authorization on Angiotensin-Receptor Blockers: Can Reduces Medical Costs in Medicaid Populations,” Health Affairs Policy Promote Rational Prescribing?,” Health Affairs 26, no. 3 24, no. 9 (September 2015): 1586-1593. (May 2007): 800-807; and M. Fischer et al., “Medicaid Prior- 29 T. Brooks et al., “Medicaid and CHIP Eligibility, Enrollment, Authorization Programs and the Use of Cyclooxygenase-2 Renewal, and Cost Sharing Policies as of January 2017: Findings Inhibitors,” New England Journal of Medicine 351, no. 21 from a 50-State Survey” (Washington: Kaiser Family Foundation, (November 18, 2004): 2187-2194. January 2017). 39 M. Shepherd, “Examination of Why Some Community 30 For children, Medicaid gives states the ability to use out- Pharmacists Do Not Provide 72-Hour Emergency Prescription of-pocket charges to promote the most cost-effective use of Drugs to Medicaid Patients when Prior Authorization Is Not prescription drugs (CHIP allows cost sharing on all drugs). Available,” Journal of Managed Care & Specialty Pharmacy 19, Generally, states have more latitude in their use of cost sharing no. 7 (September 2013): 523-533. for those with incomes above 150 percent of the federal poverty 40 National Health Law Program, “Hernandez v. Meadows level. To encourage the use of lower-cost drugs in Medicaid Settlement Agreement Materials” (Washington: National Health programs, states may establish different copayments for generic Law Program, January 01, 2004), available at http://www. versus brand-name drugs or for drugs included on a preferred healthlaw.org/issues/medicaid/medicaid-expansion-toolbox/ drug list. States must specify which drugs are considered either hernandez-vs-meadows-settlement-agreement-materials#. “preferred” or “non-preferred.” Cost sharing for non-preferred WV01TlKZOi5. drugs may be as high as 20 percent of the agency’s cost for a drug. 41 Medicaid and CHIP Payment and Access Commission, “MACStats: Medicaid and CHIP Data Book” (December 2016). 31 Medicaid and CHIP Payment and Access Commission, “Report to Congress on Medicaid and CHIP,” op. cit. 42 V. Smith et al., “Implementing Coverage and Payment Initiatives: Results from a 50-State Medicaid Budget Survey for 32 I. Schmid, M. Burcu, and J. Zito, “Medicaid Prior Authorization State Fiscal Years 2016 and 2017” (Washington: Kaiser Family Policies for Pediatric Use of Antipsychotic Medications,” Journal Foundation, October 13, 2016). of the American Medical Association 313, no. 9 (March 3, 2015): 966-968. 13 CCF.GEORGETOWN.EDU children and the rising costs of prescription drugs 43 Medicaid and CHIP Payment and Access Commission. 56 U.S. Department of Health and Human Services, Secretary “MACStats: Medicaid and CHIP Data Book,” op. cit.; and Price and CMS Administrator Verma Take First Joint Action: Medicaid and CHIP Payment and Access Commission, Affirm Partnership of HHS, CMS, and States to Improve “Medicaid Spending for Prescription Drugs,” (Washington: Medicaid Program, Press Release (March 14, 2017). Medicaid and CHIP Payment and Access Commission, January 55 L. Nichols, “What Price Should We Pay for Specialty Drugs?” 2016), available at https://www.macpac.gov/publication/ (Fairfax, VA: Center for Health Policy Research & Ethics, medicaid-spending-for-prescription-drugs/. George Mason University, May 15, 2015); Hutchins Center, 44 J. Hoadley and J. Alker, “Uncertain Access to Needed Drugs: “Ten Challenges in the Prescription Drug Market—And Ten Florida’s Medicaid reform creates challenges for patients,” Solutions” (Washington: Brookings Institution, May 2, 2017); (Washington: Georgetown University Health Policy Institute, H. Waxman et al., “Getting to the Root of High Prescription July 2007). Drug Prices: Drivers and Potential Solutions” (New York: The Commonwealth Fund, July 2017). 45 The Express Scripts Lab, “2014 Drug Trend Report,” (St. Louis: Express Scripts, March 2015), available at http://lab. express-scripts.com/lab/drug-trend-report/previous-reports. J. Alker and J. Messner, “How is Florida’s Medicaid Managed 46 Care Working for Children?” (Washington: Georgetown This brief was written by by Jack Hoadley of University Center for Children and Families, June 2016). Georgetown University Health Policy Institute 47 The Express Scripts Lab, “2014 Drug Trend Report,” op. cit. and Joan Alker of Georgetown University 48 A. Martin et al., “National Health Spending: Faster Growth in Center for Children and Families. The authors 2015 As Coverage Expands And Utilization Increases,” Health would like to thank Alexandra Corcoran, Andy Affairs 36, no. 1 (January 2017): 166-176. Schneider, Karina Wagnerman, and Kelly 49 S. Keehan et al., “National Health Expenditure Projections, Whitener for their contributions to this report. 2016-25: Price Increases, Aging Push Sector To 20 Percent of Economy,” Health Affairs 36, no. 3 (March 2017): 553-563. Design and layout provided by Nancy Magill. 50 Although children were protected from EpiPen’s price The Center for Children and Families (CCF) increases, Medicaid paid more (received a lower rebate) because EpiPen was misclassified as a generic drug. There is is an independent, nonpartisan policy and a proposed $465 settlement between the manufacturer (Mylan) research center whose mission is to expand and the government to rectify this, but it remains a subject of and improve health coverage for America’s dispute. L. Rapaport, “Mylan Underpayment on EpiPen Could children and families. CCF is based at Exceed Proposed Settlement—Study,” Reuters, March 27, 2017. Georgetown University’s McCourt School of Public Policy. 51 Medicaid and CHIP Payment and Access Commission, “Medicaid Payment for Outpatient Prescription Drugs,” (Washington: Medicaid and CHIP Payment and Access Georgetown University Center for Children and Families Commission, March 2017), available at https://www.macpac. McCourt School of Public Policy gov/wp-content/uploads/2015/09/Medicaid-Payment-for- Outpatient-Prescription-Drugs.pdf. Box 571444 52 Centers for Medicare & Medicaid Services, “Medicaid 3300 Whitehaven Street, NW, Suite 5000 Pharmacy Supplemental Rebate Agreements (SRA),” Washington, DC 20057-1485 (Washington: Centers for Medicare and Medicaid Services, Phone: (202) 687-0880 March 2017), available at https://www.medicaid.gov/medicaid- chip- program-information/by- topics/prescription-drugs/ Email: childhealth@georgetown.edu downloads/xxxsupplemental-rebates- chart-current- qtr.pdf. D. Bergman et al., “Using Clinical Evidence to Manage 53 Pharmacy Benefits: Experiences of Six States,” (New York: The www.ccf.georgetown.edu Commonwealth Fund, March 2006); and D. Bergman “State Design and Use of Prior Authorization Processes,” (Portland, facebook.com/georgetownccf ME: National Academy for State Health Policy, March 2006). 54 Centers for Medicare & Medicaid Services, “Assuring twitter.com/georgetownccf Medicaid Beneficiaries Access to Hepatitis C (HCV) Drugs,” Medicaid Drug Rebate Program Notice #172 (November 5, 2015), available at https://www.medicaid.gov/medicaid-chip- program-information/by-topics/prescription-drugs/downloads/ rx-releases/state-releases/state-rel-172.pdf.