Alabama Medicaid Drug Program in Need of Reform: NCPA Report

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Small Changes Could Mean Big Savings for Taxpayers

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State legislators should work to foster competition among pharmacies competing for the right to serve Alabama’s Medicaid enrollees

Alabama legislators could save taxpayers millions with a few simple changes to the way Medicaid prescription drug benefits are handled, according to a new report from National Center for Policy Analysis Senior Fellow Devon Herrick.

“Medicaid consumes over one-third of the General Fund, and costs state and federal taxpayers nearly $6 billion annually – about one-tenth of which participants spend on drugs and drug therapies,” says Herrick. “States are moving away from Medicaid Fee-for –Service drug programs; Alabama should consider making this move.”

Alabama distributes nearly all Medicaid drugs through Fee-for-Service programs. However, this raises costly problems with care coordination, specialty drug management, and efficiency. To alleviate the cost to taxpayers and providers alike, Alabama should:

  •     Allow health plans to manage drug benefits for those already in managed care.
  •     Transition to professional pharmacy benefit managers for special needs and disabled individuals to better control the cost of specialty drugs.
  •     Reform the remaining fee-for-service drug programs to require market-based dispensing fees.
  •     Repeal any willing pharmacy regulations designed to prevent preferred pharmacy networks and mail-order drug delivery

“The report illustrates how Alabama and other states have the opportunity to reform their Medicaid drug programs and make them more efficient,” says Herrick. “State legislators should work to foster competition among pharmacies competing for the right to serve Alabama’s Medicaid enrollees.”

Alabama’s Medicaid Drug Program: http://www.ncpa.org/pub/medicaid-prescription-reform

The National Center for Policy Analysis (NCPA) is a nonprofit, nonpartisan public policy research organization, established in 1983. We bring together the best and brightest minds to tackle the country's most difficult public policy problems — in health care, taxes, retirement, education, energy and the environment. Visit our website today for more information.

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Catherine Daniell
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