West Virginia Medicaid saves $54.4M with prescription drug carve out

When the West Virginia Medicaid agency started managing the Medicaid managed care prescription drug benefit directly in July 2017, state officials were relying on an actuarial study forecasting a $30 million savings for the state.

The West Virginia Bureau for Medical Services released a report March 13 , 2019, showing actual savings of $54.4 million to the Medicaid program for the first year of that carve-out. In addition to the savings, the prescription drug benefit carve-out resulted in $122 million paid to West Virginia pharmacies in the form of fixed dispensing fees, the report said.

The West Virginia Department of Health and Human Resources, Bureau for Medical Services requested that Navigant Consulting, as a subcontractor to The Lewin Group, assess the potential savings that have been achieved during SFY18 (July 1,2017 — June 30, 2018) due to the carve-out of prescription drug services from West Virginia’s Medicaid managed care.

Navigant took the following steps to calculate savings to the state:

  1. Reprice both SFY17 managed care and SFY18 FFS experience to NADAC rates to establish baseline comparison of costs, adjust for dispensing fees, and calculate difference in expected claim costs as of SFY18.
  2. Anlyze differences in administrative costs covered by the State under both managed care and FFS reimbursement arrangements.
  3. Forcast SFY18 managed care claim costs, as if managed care was still in place, using actual SFY17 experience as the base data.
  4. Ensure all base expenses and projections have appropriate exclusions for drugs that were not covered by MCOs in SFY17 or FFS in SFY18.

“As public policy goes, this is an extraordinary success: Tax payers save $54 million. The West Virginia economy gets an infusion of $122 million, money that had formerly gone to out-of-state pharmacy benefit managers. Citizens of West Virginia get greater access to care, and pharmacies get reimbursed a fair rate,” National Community Pharmacists Association CEO B. Douglas Hoey said in a statement.

Hoey also said, “We commend West Virginia officials for taking action and for being savvy in questioning the dollars the state was paying to managed care organizations for prescription drug benefits. If the prescription drug carve-out works in West Virginia, it can work in other states. As state legislators and Medicaid officials across the country continue considering Medicaid managed care reform, they would be wise to take a look at the West Virginia carve-out as a case study on how to bring transparency, accountability and fair reimbursements to Medicaid managed care.”

“West Virginia Medicaid Director Vicki Cunningham, R.Ph. is to be commended for her thorough research in preparing for and implementing the carve-out,” said Richard Stevens, Executive Director of the West Virginia Pharmacists Association. “Her background in the retail setting as well as her monitoring and analyzing Medicaid expenditures while serving as director contributed to her initiating the carve-out,” said Stevens.