Limiting State Flexibility in Drug Pricing image

NEJM, September 13, 2018
Nicholas Bagley and Rachel E. Sachs (Academic Fellow Alumna)

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Throughout the United States, escalating drug prices are putting immense pressure on state budgets. Several states are looking for ways to push back. Last year, Massachusetts asked the Trump administration for a waiver that would, among other things, allow its Medicaid program to decline to cover costly drugs for which there is limited or inadequate evidence of clinical efficacy.1 By credibly threatening to exclude such drugs from coverage, Massachusetts hoped to extract price concessions and constrain the fastest-growing part of its Medicaid budget.

In late June, however, the Centers for Medicare and Medicaid Services (CMS) denied Massachusetts’ request.2 On the same day, the agency issued a memorandum clarifying that, under requirements included in the Omnibus Budget Reconciliation Act of 1990, state Medicaid programs are legally obliged to cover all drugs approved by the Food and Drug Administration (FDA) — including those approved under the agency’s less rigorous accelerated-approval pathway.

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health care costs health law policy pharmaceuticals rachel sachs