In an interesting (intriguing even?) turn of events, in late December 2018 the Massachusetts Executive Office of Health and Human Services (EOHHS) announced through its public bidding site that it was seeking bids from manufacturers of select, generally high-priced outpatient drugs for supplemental rebates in MassHealth’s fee-for-service and managed care programs. While the state has before used the public bidding process successfully to negotiate supplemental rebates for the state’s Medicaid program (for example, MassHealth recently used this same process to negotiate formulary placement and rebates successful for the now competitive field of direct acting antivirals (DAAs) for Hepatitis C), the current bidding process is strange, to the say the least, in that each of the solicitations is focused on a single product with no competition. In other words, MassHealth is seeking bids from a single company (and that company presumably has zero incentive to negotiate given there are no competitors.) Products included in the solicitations include: Luxturna (Spark), Spinraza (Biogen), Radicava (Mitsubishi Tanabe), Vitrakvi (Bayer), Hemlibra (Genentech), Exondys (Sarepta), and Dupixent (Sanofi / Regeneron).
So why have EOHHS and MassHealth taken this strange path? We don’t know for sure, but we have some ideas.
As we have discussed here previously, MassHealth has long sought to increase its negotiating leverage vis-a-vis manufacturers of high-priced drugs in order to bring down the states’s expenditures on prescription drugs for its Medicaid population. In instances where there is competition (such as HCV), the Commonwealth has been relatively successful in negotiating steep discounts via supplemental rebates. However, for single source branded products without competition, the state generally lacks any leverage to negotiate. This is because the Medicaid Drug Rebate Program (section 1927 of the Social Security Act) generally requires the state to provide coverage for all drugs by manufacturers that are parties to the drug rebate agreements, and in cases of therapeutic areas where there is little competition, traditional utilization management tools (such a formulary status) are relatively ineffective. Thus, by these bids, MassHealth appears to be targeting these high-cost therapies where the state feels it is getting a relatively sour deal.
Of course, these bids are unlikely to succeed (and perhaps may receive no response at all). So why go through this process? We expect that the Commonwealth is actually expecting to receive no offers from any of the companies. As a result, we anticipate MassHealth will use this as further ammo to its arsenal in advocating with both state and Federal policymakers that it needs new tools to negotiate down prices for single source drugs (whether by waiver or state law). Notably, the bid due date (January 18th) is also just three days before the date the Governor intends to file his budget with the legislature. We would not be surprised if the Governor includes, as he has in past years, a request for new state authority to negotiate rebates with manufacturer and institute closed formulates. So, too, MassHealth may use this exercise as evidence in its negotiation with CMS over a future waiver to expand the state’s negotiating power.
We will continue to watch this process – and update as we learn more.