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Executive Summary

MSD's MEVACOR APPEARS HEADED FOR MEDI-CAL COVERAGE ON SCHEDULE for July 1. California is ready to begin notifying providers of the addition of the cholesterol-lowering agent as part of the rebate/open formulary agreement between the company and state signed on June 18. If Merck succeeds in getting the coverage process initiated on July 1, the company will have extricated a major product from a difficult administrative limbo. Mevacor has previously been reviewed by the state's MTDAC (formulary advisory committee) but was rejected for coverage by that group because of cost concerns. The state Health Department overruled the advisory committee rejection and was prepared to add the product to state coverage. However, coverage was subsequently denied by the state's finance department. Mevacor has been trapped in a non-formulary position since then. California officials will not speculate on the actual date that coverage will begin for Mevacor. However, coverage is reportedly very close. Typically, there is a lag between the time that the state begins notifying drug providers and physicians and when reimbursement begins. While the exact contract terms with California have not been disclosed, Merck is believed to be withholding the start-up of rebate payments until at least Mevacor is added to the formulary. There are three other MSD non-formulary drugs in California: Losec, Noroxin and Dolobid. California, with about 12% of the nation's Medicaid business, has been the touchstone for the success of the Merck "best price" plan. As of June 30, however, Merck reports receiving signed agreements from a dozen states. In addition to California, those states accepting the plan include Alaska, Georgia, Idaho, Maryland, New Hampshire, North Carolina, Oregon, South Carolina, South Dakota, Utah and Vermont. Merck believes those state represent in total about one-third of the national Medicaid market. Accepting the program, Georgia Department of Medical Assistance Commissioner Aaron Johnson said: "I want to commend Merck for its initiation of the program. The periodic equalization payments are an important recognition of the role Medicaid plays in the delivery of pharmaceuticals." Johnson noted that the Georgia Medicaid program provides pharmaceuticals to "more than 600,000 Georgians in need." Merck has reportedly received tentative agreements from another dozen states including several large states such as New York, Texas, Florida and Michigan. The New Jersey Medicaid commissioner signed an agreement with Merck to accept the rebate program on June 27, but the company had not received the letter by June 29. Other states expected to adopt the program imminently are Arkansas, Connecticut, Delaware, Maine, Montana and Nebraska. The District of Columbia is also reportedly near agreement.

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