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Oklahoma's SoonerCare could get refunds if drugs don't make patients healthier

Oklahoma City — Oklahoma will be the first state to experiment with charging drug companies if their medicines don't deliver the results they promised.

The Oklahoma Health Care Authority announced Thursday that it had received federal permission to negotiate agreements with drug companies for reimbursements based on how well medicines work. Drugmakers aren't required to participate in the program.

Spending on high-price specialty drugs has grown in recent years, sparking interest among states in finding other ways to pay for prescriptions, said Burl Beasley, assistant director of pharmacy services at the authority, which runs the state's Medicaid program. Oklahoma has spent more than $508 million on prescription drugs through the SoonerCare program so far this budget year.

Total U.S. spending on prescription drugs hit $328.6 billion in 2016, with Medicaid spending about $33.4 billion on drugs. Beasley said he expects other states to watch Oklahoma's program, and perhaps try something similar.

The authority held talks with 20 drug companies, and 10 quickly decided they weren't interested, Beasley said. One company, Amgen, has reached a general agreement with the state, though there's still work to be done hammering out contracts for specific drugs, he said.

‘Are you willing to stand behind it?'

Drug companies sell their products by claiming they produce better results, and the state is going to measure results against promises, said Terry Cothran, director of pharmacy management consultants at University of Oklahoma Health Sciences Center. For example, a company may say a drug will reduce hospitalizations in certain patients, or produce fewer side effects, he said.

“We say, ‘Are you willing to stand behind it?' ” he said. “If it works like they say and there's improved outcomes, the patient benefits.”

For now, the authority will focus on more-expensive drugs used for arthritis, cancer, migraines and osteoporosis, Beasley said. They also could explore agreements for drugs that are less expensive but frequently used, Cothran said.

About 12 percent of the drugs account for 72 percent of total spending on prescriptions, according to an issue brief from the Commonwealth Fund, and private insurers have experimented with “pay for performance” contracts to cut those costs since 2011. The idea has gained traction as an alternative to restricting access to expensive drugs.

It remains to be seen whether the Oklahoma experiment will save money, however. The authority could agree to remove barriers to taking a drug, like requiring prior authorization. If that happens, an increase in the number of patients taking the medication could lead to flat or even increased spending, particularly if it works well.

“It could be a good thing for the drug companies because it increases utilization of their drug,” Beasley said. “But it could be a bad thing (for the companies) if it increases utilization of their drug, because if it doesn't produce the results, we're going to want our money back.”

Doctors rarely know the cost of what they're prescribing, so it isn't likely to change their behavior, Cothran said. Making it easier to access a drug could result in more patients getting it, however, he said.

There are several hurdles to using pay for performance to cut drug spending, according to the Commonwealth Fund issue brief. Insurers may underestimate the labor and expense necessary to match patient outcomes to drugs. Also, easily measured outcomes, like reductions in cholesterol, don't always translate into fewer expensive illnesses. Drugmakers also can raise the prices of their medication to account for rebates, effectively canceling out any savings.

Even if the program doesn't save money, it's worthwhile if it means patients get the most effective drugs, Beasley said.

“The patient's going to have better outcomes, hopefully, without even knowing” about the program, he said.

Meg Wingerter

Meg Wingerter has covered health at The Oklahoman since July 2017. Previously, she lived in Topeka, Kansas, and worked at Kansas News Service and The Topeka Capital-Journal, where she earned awards for business coverage. She graduated from... Read more ›