On The Record: Maine Human Services Chief Kevin Concannon

Maine may not seem to have a whole lot of political muscle, given its small population and remote location. But in getting a grip on skyrocketing prescription drug costs, it has become a modern-day Hercules. Maine has put in place programs such as its Physician Directed Drug Initiative, which encourages doctors to use lower cost medications. And with its Maine Rx program which aims to control drug prices, it has angered pharmaceutical manufacturers and sparked a lawsuit. Department of Human Services Commissioner Kevin Concannon, who oversees the state’s Medicaid program, recently spoke with Stateline.org about what’s going on.

STATELINE.ORG: What types of programs has Maine launched over the last few years to get a handle on prescription drug costs?

Concannon: About three years ago, in going over the state’s Medicaid budget, I noticed that our prescription costs were starting to get way up there. Previously, they were just viewed as kind of a quiet little adjunct on the side. The first step we took was we started the Physician Directed Drug Initiative…but we also continued to look at other options.

Last August, I directed Medical Services Bureau staff to convene physicians and pharmacists to advise us on the efficacy of prior authorizing certain prescription drugs. There are some 3,500 prescription drugs available in the U.S. In Maine’s Medicaid program, half of the expenditures for prescription drugs–[or roughly] $200 million a year–are accounted for by the top 100 drugs. By prior authorizing, we are achieving significant savings by encouraging people to use either equally good name-brand drugs that cost far less or generics. [Editor’s note: Prior authorization is a review of medical services, including medications, to determine whether the care is medically necessary and cost effective.]

That policy was implemented starting in January and we have been rolling it out month by month, that is, adding additional prescription drugs to it. In the first two months, it has saved us about $1.5 million. The pharmaceutical industry, the manufacturers hate it. The medical association doesn’t like it, because they view it as interfering with physician offices. But my own physicians–whom I pay more attention to than the association–have said they understood why we are doing this.

Then our coup de grace here, our major surprise victory was in December. I had been writing to pharmaceutical companies all through the fall. I had four sets of letters to 350 different companies, asking them to voluntarily join in giving a discount, not giving anything free, to Maine people at certain income levels. I got 70 small companies to agree to that, but none of the big companies, none of the companies in the top 100. So I came to the conclusion that hoping and just being a nice person and saying we’re a poor state would get us nowhere, to be perfectly frank.

In January, I told the legislative leadership and the governor that we would be filing a [Medicaid] waiver, very similar to Vermont’s prescription drug waiver that had been granted in late October, hoping to catch the end of the Clinton Administration. I [told legislators and the governor] there is some risk with this because it’s very late, we don’t know if they’ll have time to review it or not, it’s just hard to know but I think it’s worth it for us to do it. And I had our staff work intensely over the holiday period, got it in and the very last day of the administration, Department of Health and Human Services (DHHS) Secretary Shalala granted this waiver.

We are very excited about the waiver because it grants a limited Medicaid benefit, simply a prescription drug benefit to somewhere between 200,000 and 225,000 Maine residents who would be eligible. And these are people who are at 300 percent of the federal poverty level or below. Now in real dollars that translates to an individual’s income of about $25,000 a year or a couple getting about $34,000 a year or a family of four it’s $50,000 a year.

For Maine, we’re 36th in per capita income. We estimate that it would include about two-thirds of the people currently residing in Maine, children and adults who do not have prescription drug insurance. So we’re in the midst of working on policies to implement that bill. How does your prior authorization program work?

ConcannonIn our Medicaid program, we approve about 13,500 new or renewal prescriptions every day, or over the course of the year about 3.5 million. With the prior authorization program, we are getting between 100 and 150 requests [for approval] on a daily basis, and that’s just in the first two months of the program. We’re approving about 75 percent of those requests, so when I think about the volume and the relatively small percentage of drugs that [call for] prior authorization and the high percentage of approvals, for the gains we’re making financially, I wish I had a half-dozen ideas like this.

We’ve already seen the impact of it because in the last three weeks of December of this past year, the average prescription price in Maine was $55 per week and that was for about 70,000 prescriptions. In the first four weeks of January, the average prescription cost dropped below $50, even though the number of prescriptions went up to 73,000. So when you do the math, a difference of $7 or $8 times 70,000 per week is $500,000. Those reduced costs per week have continued through the month of February as well, and we’re still adding additional prescription drugs.

We don’t prior authorize any drugs for which there aren’t good alternatives, either name brand or generic. We do not prior authorize any prescriptions that children use, except for one single type of very costly cream. We don’t prior authorize certain drugs for people in nursing homes, so even with those eliminations, we’re still saving significant amounts of money, far more than what we were saving in our Physician Directed Drug Initiative.

STATELINE.ORG: Why Maine, what’s in the water that’s made you take a lead on the issue?

Concannon: Part of it is recognizing the cost. We spent more money last week on prescription drugs than we did on all of the people in Maine nursing homes that the state pays for, and Medicaid [in general] covers about two-thirds of the people in nursing homes.Last year we spent more money on prescription drugs than we did on inpatient hospital care. Now [prescription drugs] are one of the major components of the Medicaid program and that’s part of the motivation for us.

Secondly–and we’re fortunate in this regard–we don’t have major prescription manufacturers in our state. I’ve spoken to some of my counterparts and also legislators from other states, and where the manufacturers are present, they run right into the legislature or governor’s offices and say, ‘Don’t do anything to slow down the cost of drugs because it will affect our industry.’ We’re at an advantage in that regard, so we don’t have to deal with the politics of that.

Also in Maine, we’re surrounded by two Canadian provinces. As you go east and north in Maine, when we talk about the difference in price of the same name-brand drugs in Canada, this is not just some obscure medical journal. This is a commonly known fact and that motivates the public at large, because they don’t appreciate it, they don’t understand it and they don’t like it. It also motivates the representatives who come to the legislature from both parties. That has helped.

The industry itself, I think we’ve had enough public exchange with them that their characterization that we’re holding Medicaid people hostage, that just doesn’t wash with people here because they know that that’s a very disingenuous statement to make. The industry has shown no willingness to voluntarily come forward and say we’re willing to give a discount at this or that level. In this case Medicaid gives us a wonderful legal lever to say we’re still going to pay for it, and ironically drug companies can make even more money by selling more of their product, but they just don’t make as much per sale. They don’t like, they intensely dislike the idea that a state is actually acting like a business.

In this case, states–and I blame myself, but I’ve awakened to it–have been far too docile and passive when it comes to the prescription challenges. We’ve been far too willing to go on automatic pilot and assume because we get the rebates for Medicaid expenditures that that’s enough. To use Medicaid as a lever to get additional benefits for people like what we’ve done with the waiver is a highly desirable and just thing to do.

STATELINE.ORG: According to a recent National Conference of State Legislatures fiscal survey, Maine is over-budget on Medicaid spending. How will you handle the situation?

Concannon: For the first time in six years, we had a Medicaid shortfall during the current year. We’ve been able to cover that shortfall with internal funds. Most of [the shortfall] came from increased prescription drug costs and costs for mental health care.

Fortunately it was about a $15 million total fund problem for us, or a $5.5 million state general fund problem. The governor put it in an emergency budget, the Legislature enacted it already, so we’ve covered it for this year.

Looking into the next biennial period, for the first time in seven years, it’s double-digit increases again. Ten or 11 percent might not seem like much compared to what I see private insurance company rates going up, but because the denominator is so large, ten percent of $1.3 billion program still translates into $130 million as an example.

STATELINE.ORG: What type of position does the threat of lawsuits put on state policymakers?

Concannon:It’s interesting. The Maine Rx case was just argued in the U.S. Court of Appeals, and the prescription drug industry went out and hired the dean of the Stanford Law School to argue the case for them. We had a couple of our Assistant Attorney Generals who are wonderful, very able attorneys, but to me it was an example of what goes on on the litigation side.

States would do well to put more resources into the attorneys that represent them on the health care side–and not just with prescription drugs–just because of its complexity and reach.

STATELINE.ORG: Maine and Vermont received approval last year for waivers to start new prescription drug programs. With a new administration in Washington, D.C., what’s your take on how many additional states may receive similar waivers?

Concannon:That’s going to be interesting. I watched DHHS Secretary Tommy Thompson on C-SPAN when he met with the governors [recently in Washington, D.C.] and assured them that he was going to act on waivers promptly and expedite them along. As a governor, he certainly obtained a number of waivers for Wisconsin. I am hopeful that that will carry forward in his term as Secretary.

I know he’s generally disposed to waivers as they pertain to Medicaid and health care. What I don’t know is what his general disposition is or that of the Bush Administration about pharmaceutical waivers. That’s a different question. I certainly hope they’ll see the importance of this, but we’ll have to just let the facts speak for themselves.

STATELINE.ORG: What’s the level of state interest on implementing programs similar to Maine’s?

Concannon: I’ve heard from a lot of folks. I testified by telephone at a hearing in Arizona about a week or so ago for a state senator. I spoke to a Pennsylvania legislator yesterday who was holding a news conference, urging the state government to pursue a waiver similar to Maine’s.

I know that work is being done next door in New Hampshire and the Northeast Coalition of Legislators met here recently–that’s all of New England, New York and a couple of other states–and they unanimously went on record to say we want to pursue waivers like Maine and Vermont. I know there’s a lot of recognition that this is a way to obtain some additional access at a lower cost.

Whether it’s prior authorization or going after a waiver or getting authorization to be a re-importer of prescription drugs–which we’re in the process of doing here–I think one has to overcome the objections of the industry, the lobbying and the inertia that goes on in the health care system. Nobody wants to have to do anything differently–whether it’s doctors, drug stores or hospitals.

It’s very important to scope out the extent to which pharmacy is now such a huge part of both important health care services to people but also their cost. We’ve gone to great lengths [to do that here in Maine]. As soon as I go over to hearings now, legislators start laughing and shaking their heads. They say, ‘Here he comes, he’s going to start talking about that purple pill again,’ [referring to] Prilosec, the most widely prescribed drug in Maine and across the country. They know now that we have, in that example, an equally good drug that costs less than half that.

So the more you can get through the arcane, confusing world of pharmacy and make it understandable, then I think that’s a requisite to getting people on board with you on what you’re trying to pursue as a strategy.

As I said to my own governor and legislature, if I felt we needed $300 million in prescription drugs, I’d be the first guy at the head of the line saying that. In the meantime, I want to make sure we’re being good managers, good stewards of the hundreds of millions we have. If we can get you the same benefit for something that costs half as much, who in our own private lives wouldn’t do that?