You asked for information on a new Florida law establishing a preferred drug formulary in its Medicaid program.

SUMMARY

In May of 2001, Florida legislators approved legislation designed to slow Medicaid spending increases by creating a list of preferred drugs. To get on the list, drug manufacturers have to offer the state a supplemental rebate on top of a federal rebate. If a drug is not on the preferred formulary, doctors must get prior authorization from the state to prescribe that drug.

Drug manufacturers challenged the law in federal court. Earlier this month, a federal district court in Florida upheld the law.

FLORIDA PREFERRED DRUG FORMULARY LAW

Generally

During its 2001 session, the Florida legislature passed a law directing the state's Medicaid Pharmaceutical and Therapeutics Committee in the Agency for Health Care Administration to develop a Medicaid preferred drug formulary (SB 792; Chapter 2001-104, attached). The law, which took effect July 1, 2001, requires physicians to obtain prior authorization from the state to prescribe nonformulary drugs. In order to be listed on

the state formulary, drug manufacturers have to agree to make supplemental rebate payments to the state in addition to the rebates already required under federal Medicaid law, or make equivalent in-kind contributions to state health care programs (see OLR Report 2001-R-0725). If a drug manufacturer does not make these additional payments, its drugs are excluded from the formulary and are subject to the prior authorization requirements.

Mental-health related drugs, anti-retroviral drugs, and drugs for nursing home and other institutional residents not included in the formulary are not subject to prior authorization.

Medicaid Pharmaceutical and Therapeutics Committee

The 11-member committee consists of five pharmacists, five physicians, and one consumer representative, all appointed by the governor. The governor must insure that at least some of the members represent Medicaid participating physicians and pharmacies "serving all segments and diversity of the Medicaid population, and have experience in either developing or practicing under a preferred drug formulary. " At least one of the members must represent the interest of pharmaceutical manufacturers.

The Florida Agency for Health Care Administration must adopt a preferred drug list upon recommendation of the committee. To the extent feasible, the committee must review all drug classes included in the formulary at least every 12 months and may recommend additions to and deletions from the formulary, "such that the formulary provides for all medically appropriate drug therapies for Medicaid patients which achieve cost savings contained in the general Appropriations Act. "

The agency must publish and provide the preferred drug formulary to all state Medicaid providers.

Inclusion of Drugs in the Formulary

The committee must ensure that pharmaceutical manufacturers agreeing to provide a supplemental rebate as outlined in the law have an opportunity to present evidence supporting inclusion of a product on the preferred list. Upon timely notice, the agency must ensure that the committee will review any drug approved by the U. S. Food and Drug Administration under a priority review classification at its next regularly scheduled meeting. Also, to the extent possible and upon notice by the manufacturer, the agency must schedule a product review for any new product at the next regularly scheduled committee meeting.

The committee must develop its preferred list recommendations by considering the efficacy, safety, and cost effectiveness of a product. The committee may also make recommendations to the agency concerning the prior authorization of any prescribed drug covered by Medicaid. Medicaid recipients can appeal agency preferred drug formulary decisions using the Medicaid fair hearing process.

Court Challenge to Law

In August 2001, the Pharmaceutical Research and Manufacturers of America (PhRMA) filed suit in federal district court in Florida seeking to enjoin the law. PhRMA claimed that the exclusion of many brand-name prescription drugs from the state's preferred drug list violated federal Medicaid law (PhRMA v. Meadows, N. D. Fla. , 4: 01CV356-WS). Earlier this month, a federal judge in Tallahassee let the drug list law stand. The court found that the Florida law steered doctors and patients toward certain preferred drugs, but it did not prevent access to nonpreferred drugs, which would be illegal under federal law.

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