News Release from NCPA


NCPA Study: Quality, Efficiency Improves With Private Health Plans

Dallas, TX (November 14, 2013) – Moving Medicaid enrollees into managed drug plans would save Michigan billions, according to a new study from the National Center for Policy Analysis (NCPA).

Nationally, more than half of Medicaid drugs are distributed on a fee-for-service basis, meaning that prescription drugs are distributed separately from health plans. As Michigan moves Medicaid enrollees into privately-administered managed care plans, the state should also integrate prescription drug benefits with those health plans.

Private health plans that provide medical care to Medicaid enrollees are the logical entities to manage drug benefits. Integrating the two would improve quality and efficiency:

Rather than negotiating with pharmacy networks, state fee-for-service Medicaid programs often arbitrarily pay much higher dispensing fees than they would in a competitive market.
Utilization of generic drugs is often lower in state fee-for-service programs, and the number of prescriptions per member is higher.

A Menges Group study found that integrating drug and health benefits in a statewide managed care program could save Michigan Medicaid $1.9 billion over 10 years. Despite these benefits, community pharmacists and pharmacy trade associations often oppose moving from fee-for-service Medicaid drug programs to privately-managed Medicaid drugs.

Trade associations for small pharmacies advocate laws to prohibit exclusive Medicaid pharmacy networks.
Community pharmacists also lobby lawmakers to discourage cost-efficient, mail-order drug programs commonly found under managed care.

“Michigan legislators should avoid the temptation to enact these types of protectionist regulations designed to limit competition among pharmacies participating in the Medicaid program,” said Devon Herrick, Senior Fellow at the NCPA.

Full text: Devon M. Herrick, “Reforming Michigan’s Medicaid Drug Program,” National Center for Policy Analysis, November 14, 2013.