Medicaid's Latest Cost-cutting Proposal Could Hurt Black Patients

Late last year the Food and Drug Administration approved two breakthrough therapies for sickle cell disease -- a moment of great hope for the 100,000 Americans, overwhelmingly Black, who suffer from the debilitating blood disorder. Yet federal regulators seem poised to finalize a new rule that could dash those hopes for many.

Medicaid provides health coverage for 85 million lower-income Americans, among whom Blacks are disproportionately represented. Officials want to change the way the program calculates how much the program pays for prescription medicines.

This move may be designed to cut government costs, but it does nothing to lower costs for the very people Medicaid purports to be helping. Furthermore, in seeking these deep cost cuts, the pricing aspect of the program has become complicated with required discounts potentially being deeper than the actual cost of the drug; making the program impossible to deploy.

Furthermore, given the tremendous number of healthcare deserts and insulin deserts in the US, this budgeting ploy seems shortsighted and jeopardizes access for patients who need new treatments. If at all serious about addressing health inequities in minority and other underserved communities, Medicaid should abandon this rule change or risk making access to these breakthrough drugs impossible for their already underserved patient population.

By way of background, Medicaid currently receives a sizable manufacturer rebate on brand-name drugs -- calculated in part based on either 23.1% off the average price of the drug, or taking into account the best price they offer to other buyers. The law works well, because Medicaid generally receives the lowest price the drug maker offers to a customer in the marketplace.

The new rule imposes several changes. Notably, it requires manufacturers to "stack" all the rebates offered on each unit sale at each stage of the supply chain-- rebates going separately to wholesalers, pharmacies, and health plans. That's directly contrary to the law, because it goes beyond a single entity and demands a price lower than drug makers are offering per unit to any real customer -- this is a price that does not exist. In other words, the discount or rebate may be greater than the original cost of the drug.

Worsening matters, the information necessary to comply with a stacking requirement isn't currently available. To comply with the rule would require an account of rebates at each stop from the manufacturer to the patient -- information drugmakers don't have and would need to collect from every entity along the supply chain in a complex "follow the pill" manner.

It's noteworthy that the proposal is so complicated that the government has thrown up its hands, confessing it's unable to estimate what the potential cost savings of stacking rebates might amount to. But, where does this leave the underserved patient population in need of these breakthrough treatments?

It's certain, however, that Medicaid officials are expecting stacked rebates to save the program money by increasing rebates from drugmakers. In addition, Medicaid wants data from drug makers on the cost of developing their medications. The idea seems to be to create momentum for deeper price cuts by showing that the cost of new treatments, like the ones for sickle cell, is high relative to their development costs.

But that's misleading in the extreme, because sales by drug makers must cover the cost of development not only of their successful products, but also of treatments that fail during expensive clinical trials. Only about one in 10 drugs entering clinical trials goes on to win FDA approval. Accounting for the cost of failed drug candidates, drug developers can expect to invest $2 billion or more on average for each new therapy that reaches patients.

Altogether, these direct and indirect efforts to push prices down will deter drug developers from pursuing research for conditions that are more prevalent among the Medicaid patient population -- for example, diabetes, heart disease, and mental health or substance use disorders. These are also illnesses Black patients experience at disproportionate rates.

Medicaid beneficiaries already experience longer wait times at the doctor's office, are more likely to delay care due to family or work conflicts, and sometimes forgo medical attention altogether due to confusion over what their insurance will cover.

What's more, one-third of Americans live in a county with limited access to at least one form of healthcare infrastructure, like pharmacies, primary care providers, hospitals, or low-cost health clinics. Black people are more likely to live in one of these so-called "healthcare deserts."

In addition, research shows that lack of racial concordance negatively impacts communication, trust, and adherence to medical advice; creating episodes of devastation that threaten to poison the very system upon which Medicaid beneficiaries so desperately rely.

Medicaid's purpose is to support the nation's least-advantaged populations by increasing their access to healthcare services. For Black people, the lingering effects of racism and structural discrimination mean that accessing care is often a serious challenge.And yet, officials seem to have overlooked how their proposal could end up making it harder for patients to get the care they need.

Since most Medicaid beneficiaries pay little to nothing out-of-pocket for their medicines, the rule will do little to help the people Medicaid serves.

Medicaid has lost sight of its mission with this proposal. Dropping it is the first step in getting the program back on track and preventing the healthcare devastation that is now rampant among its underserved patient population. 

Kevin B. Kimble, Esq., is the founder and executive director of the Southern Christian Leadership Global Policy Initiative.