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OKLAHOMA MEDICAID OPEN DRUG FORMULARY EFFECTIVE SEPT. 1 UNDER RECENTLY ADOPTED PLAN; GOVERNOR’s VETO OF BILL OVERRIDDEN BY LEGISLATURE MAY 22

Executive Summary

Oklahoma's 15-year-old closed formulary will be opened Sept. 1 under a bill, SB 457, cosponsored by Sen. Ben Brown (D) and Assemblymen Don Mentzer (D) and Bill Mitchell (D). A veto of the bill by Governor Henry Bellmon was overridden by the legislature on May 22. Oklahoma has had a restricted drug formulary since the middle of the 1970's but has not mandated generic drug substitution. Reportedly, one catalyst for the bill was the state Medical Advisory Committee's decision not to admit Merck's Mevacor (lovastatin) to the formulary. The formulary does not include cholesterol-lowering drugs. The state has not formally responded to Merck's recent proposal to provide "best price" discounts if it is assured that all its products will be reimbursed by Medicaid. The open formulary may obviate the need for such a contract. Merck is scheduled to make a presentation on its proposal to Oklahoma Medicaid officials next month. The Oklahoma legislation is illustrative of the types of open market legislation that the brandname drug companies are seeking at the state level. PMA has strongly supported the bill. The adoption of an open formulary bill, without the industry committing to discount levels, might make it more difficult for Merck to drum up support within the industry for its suggested trade of "best prices" to Medicaid programs for open formularies. The Oklahoma Pharmaceutical Association did not oppose the bill, which may be practically as good as pharmacy support at the state level. The pharmacy group says it is concerned about the potentially high cost of opening the formulary. The Oklahoma Department of Human Services estimates that the open formulary could increase costs of the drug component of the Medicaid program by as much as 30%. The cost of the drug program in fiscal 1990 is expected to reach $44 mil., according to the department. The department will monitor costs as the formulary changes. The open formulary bill states that: "The Oklahoma Department of Human Services "shall not establish a drug formulary that restricts by any prior or retroactive approval process a physician's ability to treat a patient with a prescription drug that, in his professional judgment and within the lawful scope of his practice, he considers appropriate for the diagnosis and treatment of the patient." The legislation directs the department to allow reimbursement for "any drugs that have been approved and designated as safe and effective by the Food and Drug Administration and that are prescribed by licensed medical, dental, podiatric physicians and or osteopathic practitioners for eligible recipients of assistance payments." The bill does not refer to generic substitution. SB 457 exempts drugs used for cosmetic purposes, anorexic drugs and OTC drugs, although it adds: "The department shall be authorized to include these categories for reimbursement based upon specific need." In his May 14 veto of the bill, Governor Bellmon emphasized the potential cost increases resulting from the open formulary. "The bill would require the Department of Human Services to pay for any drug used by a Medicaid patient regardless of whether another equally effective but less expensive medication was available." Bellmon also noted the savings lost from the state's inability to require generic substitution. "Medical bills are among the fastest increasing costs burdening the welfare system today. If [the Department of Human Services] is not allowed to control the rate of increase by requiring welfare recipients to use generic drugs in place of name brand prescriptions, these same welfare recipients will suffer because other programs must be cut."

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