Tennessee's new Medicaid model allows state to deny coverage of some drugs

Tennessee's newly approved Medicaid block grant model includes a closed formulary that allows the state to decline coverage of certain prescription drugs if regulators say they are too expensive, The New York Times reported. 

Medicaid is required to cover a wide variety of prescription drugs, but is guaranteed by law to pay the lowest price for those drugs of any drug purchaser in the U.S., according to the Times. Under Tennessee's new Medicaid model, the first of its kind, the state will be allowed to negotiate prices with drugmakers and can decline coverage if it decides the price is still too high. Massachusetts has previously asked for permission for similar authority, but was denied, the Times reported. 

A closed formulary is the same approach taken by private health insurers. The state is allowed to deny coverage of certain drugs, with an exceptions process for specialty drugs, according to CMS. 

CMS said the closed formulary will be evaluated for its effect on beneficiary access and on the cost of prescription drugs. The agency received comments expressing concern that pharmacy benefits would be less generous under the state's Medicaid program because the formulary would be limited similarly to those offered by employers and private insurers. 

But CMS said Tennessee will be "subject to increased oversight and monitoring to ensure that all beneficiaries have access to needed pharmaceuticals." 

The state also is required to publish in print and online an up-to-date list of all covered drugs in their formularies and provide "timely" notice to beneficiaries of any changes to the pharmacy benefit before the change takes effect.   

To review CMS' approval, click here.

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