PRESCRIPTION DRUG CAPS – AN INEFFECTIVE POLICY THAT
HARMS PATIENTS
Facing double-digit annual increases in prescription drug costs in their Medicaid budgets, states are looking at every alternative to cut costs. One policy that is both
widely adopted and widely criticized is to place monthly or annual caps on the number
of prescriptions that an enrollee of a state Medicaid or other state prescription drug plan
may fill. Despite the fact that these policies have been repeatedly discredited in peerreviewed
studies as not only harmful to patients but also as ineffective in reducing total
medical costs, states continue to adopt these policies, which promise initial cost avings
and are simple to understand and implement. Many alternatives policies are available,
however, which promise substantial savings without harming patient health.
Research and experience has discredited prescription drug caps
Several studies including one dating back nearly 20 years have discredited drug caps
as an effective strategy for cutting costs, and have documented worsened health for
patients subject to caps. People with limited prescription drug coverage skip their
medicines, make more trips to the hospital and die sooner than patients with unlimited
benefits, according to a 2006 New England Journal of Medicine study. Comparing the
medical records of 157,275 people in a plan that covered only the first $1,000 worth of
drugs with those of 41,904 people who had unlimited drug coverage, the study ound
that those subject to caps on drug coverage spent 31 percent less on drugs, but their
total medical costs were not significantly lower, as they had a 9 percent greater chance
of going to the emergency room and a 13 percent greater chance of landing in the
hospital. The study found that any savings in drug costs from the cap were offset by
increases in the costs of hospitalization and emergency department care, and the
annual death rate of people whose drug benefits were capped was 22 percent higher
than those with unlimited benefits.
The 2006 study reaffirms findings of a 1987 clinical study of the impacts of a New
Hampshire policy capping prescriptions for Medicaid enrollees at 3 per month. The
research, directed by Dr. Stephen B. Sourmerai and published in the New England
Journal of Medicine in 1987 and 1991, compared costs and health outcomes in New
Hampshire, which capped prescriptions, and New Jersey, which did not. As Dr. Jerry
Avorn describes in his book Powerful Medicines: The Benefits, Risks and Costs of
Prescription Drugs, “The findings were astonishing.” Although the health status of
patients in the two states was nearly identical in the months before the cap was
implemented, “… once the limits were applied the New Hampshire Medicaid patients
ended up in nursing homes, hospitals, or cemeteries significantly more often than the
similar New Jersey Medicaid patients, who retained full drug coverage.” lthough
initially the caps appeared to save money, since prescription costs went down at first,
once state costs of additional hospitalizations and nursing home institutionalization were
factored in, “it turned out the program had hardly saved the New Hampshire Medicaid
Program any money after all.”
States nonetheless continue to adopt this failed policy.
According to October 2005 data, at least 12 states had drug caps (37 were surveyed).
Despite the availability of better alternatives and the impact on patient health, states
continue to adopt policies that arbitrarily limit the number of prescriptions that can be
filled. In 2006, both Tennessee and West Virginia adopted policies incorporating drug
caps to save money in state health programs. TennCare now limits adults to five
prescriptions per month, and only two of them can be brand-name medications. These
restrictions are among the tightest limits anywhere in the country. While they have
saved money up front in TennCare, anecdotal evidence is that the policy is already
negatively affecting the health of enrollees. In West Virginia, Medicaid enrollees who
fail to sign or meet then goals of a "personal responsibility contract" will have their
benefits reduced, and could face caps on the number of prescriptions that would be
covered or other benefits. In Mississippi, effective July 1, 2005, Medicaid enrollees are
allowed five prescriptions per month - two brand-name drugs and three generic
medications. The previous policy allowed them to receive up to seven prescriptions per
month -- five of any type and two additional drugs that require prior authorization.
Facing a lawsuit challenging this policy as applied to HIV-positive people, who must
take a prescription drug “cocktail” of several medications, the state lifted this policy with
respect to HIV-positive persons. Many others with chronic conditions, however, are
also required to take multiple prescriptions and they remain subject to the arbitrary cap.
There are better alternative policies available
There are many alternatives to capping prescriptions that promise significant savings
without the negative consequences that have been documented with caps. Some of
these policies include multi-state and multi-program purchasing pools, negotiating better
prescription drug prices and rebates by adopting an enforceable preferred drug list with
prior authorization for non-preferred drugs, enacting state false claims acts to address
Medicaid fraud, eliminating the middleman vendor or adopting transparency standards
for vendors that negotiate rebates, promoting generics, and communicating clinical
research and efficacy information to medical providers and consumers. Another policy
option for increasing savings without limiting access to prescription drugs is to maximize
participation in 340B pricing under the federal Public Health Act.
(Updated April 2008)
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