2005 Legislative Update Florida Medicaid Prescribed Drugs Program

1. 2005 Legislative Update Florida Medicaid Prescribed Drugs Program North Carolina Medicaid Family Impact Seminar May 24, 2005  Sybil M. Richard Assistant Deputy Secretary for Medicaid Agency for Health Care Administration

2. Current Pharmacy Benefit • 2.2 million beneficiaries enrolled • All Medicaid recipients receive equal pharmacy benefits • Includes categorically and Medically Needy • Unlimited number of prescriptions covered • Limited to four brand name prescriptions per month • Governed by Preferred Drug List (PDL); prior authorization required for non-PDL drugs • Mental health drugs and HIV/AIDs drugs exempt from PDL and four-brand requirements

3. Current Pharmacy Benefit(continued) • Minimum 29.1% supplemental rebate required for PDL consideration by Pharmaceutical and Therapeutics Committee • Lock-in program for over-utilization and misuse • Providers reimbursed at lower of Average Wholesale Price (AWP) minus 15.4% or Wholesaler Acquisition Cost (WAC) plus 5.75% • Expanded State Maximum Allowable Cost (MAC) pricing limits for generics/brands

4. Trends in Medicaid Rx Expenditures • Florida prescription drug trends are consistent with National trends • Since FY96-97 growth in pharmacy services has outpaced spending in other areas of Medicaid • Since FY 2001, Medicaid pharmacy claims have increased by an average of 12% annually • Total expenditures for Medicaid pharmacy services have grown annually by an average of approximately 16%

5. Monthly Four Brand Prescription Drug Limit Preferred Drug List Supplemental Drug Manufacturer Rebates Drug Prior Authorization Drug Therapy Limits Ingredient Cost Adjustments State MACs Beneficiary Pharmacy Lock-In Wireless Handheld Clinical Pharmacology Drug Information Database Home Delivery Pharmaceutical Services Pilot Project Prescribed Drug Cost Control Programs 1999-2004 $500 Million Drug Savings 2000-2002

6. Managing Pharmacy BenefitsFY 04-05 Initiatives • Increased number of physicians in wireless handheld program from 1,000 to 3,000; added web-based component and e-prescribing • Expanded of lock-in program to include physician lock-in • Limited dosage for erectile dysfunction drugs, Cox-II Inhibitors, and Atypical Antipsychotics • Restricted off-label use of Neurontin® • Increased minimum supplemental manufacturer rebate to 29.1% • Reduced pharmacy ingredient cost reimbursement to lower of AWP minus 15.4%, or WAC plus 5.75%; expanded State MACs • Implemented of behavioral pharmacy management system

7. Managing Pharmacy BenefitsFY 05-06 Legislative Changes • Authorized to modify the preferred drug list to enable the State of Florida to offer clinically appropriate and cost effective options for Medicaid recipients • Minimum 29.1% supplemental rebate required for consideration • Manufacturers will be asked to submit their best offer for each drug in each therapeutic class to achieve a guaranteed net unit price • Products will be presented to the Pharmacy and Therapeutics (P&T) committee with their relevant clinical efficacy and relative net cost positions • P&T committee will recommend the most cost effective drugs in each therapeutic category for inclusion on the PDL • PDL will include a minimum of two products where available and could represent three or more products in many categories

8. Managing Pharmacy BenefitsFY 05-06 Legislative Changes • Modified PDL continued: • Step therapy will permit prior authorization for drugs not included on the PDL • HIV/AIDS products will be exempt from prior authorization requirements • Medicaid will continue the policy of expanding the use of available Over the Counter (OTC) drugs where these are more cost effective • 4 brand cap eliminated

9. Managing Pharmacy BenefitsFY 05-06 Legislative Changes • Step Therapy and Prior Authorization: • Drugs listed on PDL must be tried before others will be authorized • Physician must show that formulary drugs were used and proven unsatisfactory for the patient within the last twelve months • Not required if physician provides clinical documentation of medical necessity because: • there are no acceptable clinical alternatives listed; • the alternative is ineffective; or • historic evidence/characteristics of the patient or the medication indicates that the drug is likely to be ineffective • May be waived by rule for specific drugs in limited situations

10. Defining Preferred Drug List (PDL) • List of prescription products selected by the Pharmaceutical and Therapeutics Committee • FDA approved drugs, not listed, are available with prior authorization • 42 USC s 1396r-8

11. State Supplemental Rebate Program • Assures pharmaceutical manufacturers an opportunity to present evidence supporting inclusion of their products • Authorizes the Agency to negotiate rebates from manufacturers in addition to those required by Title XIX of the Social Security Act • No less than 14 percent of Average Manufacturer Price (as defined in 42 USC s 1936); or federal or supplemental rebate, or both, equals or exceeds 29.1 percent

12. State Supplemental Rebate Program(continued) • Agreement to pay the minimum supplemental rebate will ensure consideration of the product for preferred drug formulary inclusion—however placement is not guaranteed • There are no upper limits on the supplemental rebates the Agency may negotiate • Agency decisions will be made on clinical efficacy, safety, cost effectiveness and recommendations of the Pharmaceutical &Therapeutics Committee, as well as net price to Medicaid after federal and state rebates

13. Medicaid Pharmaceutical and Therapeutics (P&T) Committee • Membership: • Four physicians licensed under chapter 458 • One physician licensed under chapter 459 • Five pharmacists licensed under chapter 465 • One consumer representative • Medicaid participating physicians and pharmacists must be represented • Interests of all segments of the Medicaid population must be represented • At least one member shall represent the interests of pharmaceutical manufacturers • Members will serve two year terms, and can be reappointed

14. Duties of the P & T Committee • Recommend preferred drug list pursuant to 42 USC s 1396r-8 • Assure efficacious and cost effective drug therapies • Review all drug classes at least every twelve months • Meet at least quarterly

15. Managing Pharmacy BenefitsFY 05-06 Legislative Changes • Option to enter into a state purchasing pool in partnership with other state Medicaid programs to achieve savings • State authorized implement age related prior authorization for certain drugs • May provide 100-day supply of prescription drugs when cost effective