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STATE MEDICAID FORMULARIES WOULD BE AUTHORIZED

Executive Summary

STATE MEDICAID FORMULARIES WOULD BE AUTHORIZED under a provision of the budget reconciliation bill, which was adopted by the House Ways & Means Committee at a May 11 markup. The measure repeals a prohibition on state establishment of restrictive formularies that states will reimburse under Medicaid. The prohibition was established under the 1990 Medicaid law as a way to increase beneficiary access to pharmaceutical products and as a quid pro quo for manufacturer price rebates to state agencies. The bill also repeals the 1990 ban on state Medicaid agencies' establishment of prior authorization requirements on new drugs within the first six months after market introduction. The legislation is not expected to reach the House floor until the week of May 24. As originally drafted, the bill did not allow formularies to exclude Medicaid coverage of drug products that represent "significant therapeutic advantage in terms of safety and efficacy." An amendment offered by Rep. Waxman (D-Calif.) and adopted at the markup altered the language to prohibit exclusion of drugs that have "significant, clinically meaningful therapeutic advantage in terms of safety, effectiveness or clinical outcome." The amendment was to emphasize that prescription drugs exempt from exclusion by formularies are limited to products that can be shown to have clear advantages over competing products in terms of clinical outcomes. It is unclear whether more expensive drugs with more convenient dosing may be excluded under the amendment. Products with once-daily regimens may not have "clinically meaningful" advantage over less convenient products, but they might be shown to improve compliance and "clinical outcome." Waxman's amendment also stipulates that states must issue written explanations of their decisions to exclude products from Medicaid coverage, unless such decisions were made at open, public meetings. The open explanation provision of the amendment was urged by Rep. Townes (D-N.Y.). The amendment also clarifies that state Medicaid agencies may cover off-label uses of approved drugs as long as the prescribed use is "medically accepted" and "based on information from the appropriate compendia."
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