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STATE MEDICAID FORMULARIES: NEW CARDIOVASCULAR, ANTI-INFLAMMATORY DRUGS ARE EARLIEST ADDITIONS FOLLOWING APPROVAL IN SIX STATES, DUKE's GRABOWSKI SAYS

Executive Summary

Cardiovascular and anti-inflammatory drugs were added to Medicaid formularies more quickly than other therapeutic Rx drug classifications reviewed in a recent study of six state Medicaid programs by Duke University economics professor Henry Grabowski, PhD. New cardiovascular and anti-inflammatory drugs are usually available to Medicaid beneficiaries for over half of their first five years of marketing life, Grabowski said. Grabowski's study looked at the "diffusion" of new drugs through Medicaid formularies in California, Illinois, Kentucky, Mississippi, South Carolina and Washington during 1974-1982. Grabowski used a sample of 84 outpatient drugs approved from 1974-1982 in the study. Only patentable compounds with at least some effective patent life remaining at the time of first marketing were included. Grabowski reviewed the results of his study at a Food and Drug Law Institute symposium in Washington, D.C. on Oct. 5. A draft report of results was compiled in September. A delay in formulary acceptance cuts into the product's availability during its period of market exclusivity, Grabowski said. Given the current legislative interest in a national formulary as part of a drug benefit under Medicare, the Duke professor suggested that policy makers consider ways of addressing what he predicted would be a resulting loss of research incentives in the pharmaceutical industry. Grabowski said: "If the future pharmaceutical marketplace is to be characterized by wide-spread formulary restrictions like those observed in state Medicaid programs, policy-makers will need to address the effects that this is likely to have on innovation. This analysis indicates the incentives for pharmaceutical R&D will be dramatically altered by that kind of development." Gastrointestinal, respiratory and neurology/analgesic drugs were available on formularies for just under half of their first five years, Grabowski said. Slowest to be added to the formularies were psychotherapeutics, metabolic and anti-fertility drugs and anti-infectives. Grabowski maintained that the first five years "is a critical period in a drug's life cycle from the standpoint of sales revenues and profits because the average effective patent life for a new drug is only about half the nominal life of 17 years." Kentucky and California had the most stringent formularies for new drug approvals, Grabowski said. Average acceptance rates in those two programs were approximately 30% and the average time lag (between FDA approval and addition to the formulary) for drugs accepted exceeded 40 months. By contrast, approval rates in the other four states ranged from 68% to 90% and the average lag was between 12 and 25 months, he said. In a discussion of trends over the eight year period, Grabowski said that "in our six state sample, the probability of approval of a typical new drug onto the Medicaid formulary is now around 50%." In a comparison of the availability of drug categories ranked according to FDA standards of therapeutic importance, Grabowski found that "the group of new drugs ranked as significant therapeutic advances (class A) were the least available to the Medicaid population." That group, which included only 11 new drugs, was available an average of 1.6 years out of the first five years of market life, he said. In response to a question, Grabowski noted that one highly rated drug, Roche's Accutane, had not been placed on any of the six state formularies considered in the study as of the end of 1985. Drugs ranked as "modest gains" (class B) were available an average of 2.1 years out of the first five, and drugs ranked as "little or no gain" were available 2 years on average.
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