New York’s Discount Prescription Drug Plan: Medicaid Hammer With A Twist?

A bill to provide discounts on prescription drugs to low-income New Yorkers recently passed the Assembly and has moved over to the Senate.

A03848 seeks to give the state the power to “negotiate” discounts for prescription drugs for Empire Staters who earn up to 350% of the Federal Poverty Line, but are not eligible for Medicaid or other programs. Although the bill initially appears to reflect lessons learned from failures in other states, it has not quite solved one problem.

When a drug maker provides a discount to a private patient, it must seek and receive a waiver from the federal Centers for Medicare & Medicaid Services (CMS), so that the discount is exempted from CMS’ “best price” or “most favored customer” rule. If not, CMS can use the discount to ratchet down prices that government programs pay. Because government programs are such huge buyers of prescription drugs, their forcing overly aggressive discounts results in higher prices in the private market. Obviously, this can spiral out of control, as I have described elsewhere (see pp. 9-10).

Apparently recognizing this, A03848 gives the state the authority to seek a waiver from CMS for this new program. Unfortunately, “seek” does not always mean “get”, and the New York discount plan would be able to start before it gets such a waiver – if ever.

Furthermore, the NY legislation comes very close to swinging the so-called “Medicaid hammer”, a tactic that has failed in Maine. Basically, the hammer is the state’s threat to kick a drug maker out of Medicaid if it does not play along with the plan to discount meds for the non-Medicaid eligibles. A03848 gives the state the power to “seek supplemental rebates from manufacturers consistent with those rebates provided to the Medicaid program for drugs on the Preferred Drug List”.

This bill reminded me of Maine Rx Plus, a failed program that I last visited in 2005, when I wrote a paper on two California ballot initiatives, one of which would have replicated Maine Rx Plus’ government price-fixing. At the time, Maine Rx Plus had stumbled through years of lawsuits and very few pharmacies were participating.

Back in 2005, I thought Maine Rx Plus would continue to struggle. Sure enough, it looks like it is still in nowheresville. It’s website has the same “fact sheet” that it did when I wrote my paper in 2005! Is this where A03848 will take New York?

There is an alternative, about which I also wrote in my previous analysis: Ohio’s Best Rx, which relied on voluntary collaboration with drug makers and attracted over 90% of Ohio’s pharmacies to participate. I figured Ohio’s Best Rx would prove more attractive to patients, and it looks like that’s the case. Ohio’s Best Rx website is up to date, with very detailed annual, quarterly, and monthly reports. The latest announces that the program has enrolled over 360,000 people since January 2005.

I hope, for the sake of New Yorkers who need prescription drugs, that the Empire State’s politicians will choose the path of co-operation rather than conflict.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top