Medicaid, Under the Influence

Published — July 18, 2018 Updated — October 22, 2018 at 1:37 pm ET

How we investigated drugmakers’ influence over Medicaid


The Center for Public Integrity began investigating the influence of the pharmaceutical industry on state Medicaid programs eight months ago. Prescription medications under those programs cost states tens of billions of dollars annually. And the cost has been increasing, nearly doubling between 2008 and 2016.

To better understand this, reporters Liz Essley Whyte and Joe Yerardi dug into how states decide which prescription drugs Medicaid programs will prioritize — and whether pharmaceutical companies influence the process. NPR health policy correspondent Alison Kodjak later joined in the project, adding her expertise.

Reporters married data analysis with information from interviews of more than 50 people and from hundreds of pages of court records, financial disclosure reports and other documents.

The code and data behind this story’s analysis is publicly available on GitHub. A summary follows below:

Collecting data on the state boards

State boards often known as pharmacy and therapeutics committees or drug utilization review boards typically prioritize which drugs Medicaid patients should receive. The boards are composed of volunteer pharmacists, doctors and sometimes drug company representatives. Often, Medicaid officials must approve the boards’ recommendations. The investigation refers to the boards as List committees because they help decide how the Preferred Drug List system works in each state, though in many states their duties are divided between two committees: One committee decides which drugs to include on the List, while the other sets the rules for when the state can pay for other drugs.

No central repository listing the membership of the boards exists. So Center for Public Integrity reporters called state Medicaid agencies, scoured websites, reviewed meeting minutes or filed public records requests for all 50 states. We entered details about those individuals — more than 1,000 in all — serving on such boards from January 2016 through June 2018 into a spreadsheet. We were unable to obtain information on the members of two out of the four committees in Illinois and South Carolina; Illinois Medicaid did not respond to repeated inquiries, while South Carolina was reorganizing one of its committees and did not supply past information in time for publication.

Analyzing drug company payments to doctors

One potential avenue of influence is drug company perks given to the doctors serving on these boards. Drug companies are required to report such payments — which may include free dinners or travel, consulting fees, speaking honorariums or research grants — to the federal Centers for Medicare and Medicaid Services, which is published as the Open Payments dataset. Our analysis did not include research payments.

To determine the extent of those payments to doctors serving on Medicaid drug boards, we matched the first names, last names and states of board members with those of doctors in the Open Payments data.

The CMS data covers payments made from August 2013 through 2017 to doctors specializing in medicine, osteopathic medicine, podiatric medicine, dental medicine or dental surgery, optometry, as well as chiropractors, but does not include pharmacists or other health professionals who serve on List committees. Center for Public Integrity reporters recorded degree information, where available, for Medicaid drug board members to determine the pool of doctors on such boards.

Some states have multiple doctors with the same name. To find potential duplicates for each matching board doctor, we used both the Open Payments data and the National Plan & Provider Enumeration System, a national database where all physicians, not just those taking drug company payments, register. Doctors with potential duplicates — more than one doctor with the same name and state — were excluded when calculating the extent of payments among doctors serving on Medicaid drug boards if the NPPES data indicated one or more of the doctors did not receive any payments. In cases where multiple doctors existed but Open Payments indicated they all received payments, we calculated the payments using the doctor taking the lowest amount.

The analysis revealed that of the 455 physicians covered by Open Payments and serving on such boards, at least 283 received money or equivalent freebies from drug companies, with at least 103 receiving more than $1,000 and at least 34 receiving more than $10,000. Forty-eight states had one or more doctors on a board who accepted payments, while 38 states had at least one doctor who accepted more than $1,000.

Analyzing drug interests’ lobbying of state legislatures

Another avenue by which pharmaceutical interests can influence Medicaid programs’ drug purchasing policies is through lobbying of state legislatures. Such a lobbying effort by Eli Lilly and Co. in Florida nearly two decades ago succeeded in securing passage of a bill that exempted the company from having to offer the state’s Medicaid program a discount on mental health medications.

To determine the extent of such lobbying, the Center for Public Integrity analyzed lobbyist registration data collected by the National Institute on Money in Politics from 2008 through 2017. The Institute standardized the names of the entities that hired the lobbyists and categorized about 40 percent of the 2.7 million records by industry. It is thus likely that our count of pharmaceutical lobbyists is an underestimate.

The analysis revealed that the pharmaceutical manufacturing industry fielded an army of more than 2,200 registered lobbyists, on average, in statehouses each year for the past decade. That’s nearly one lobbyist for every three state lawmakers nationwide.

Calculating Medicaid spending on drugs

To document the rising cost of prescription drugs for Medicaid programs, we pulled CMS state drug utilization data that includes a field indicating how much state Medicaid programs paid for each drug. But when it comes to state Medicaid programs, prescription drugs are like cars: Nobody pays the sticker price.

That’s due to the existence of rebates. The federal government requires drug manufacturers to give certain discounts to participate in Medicaid, while states use their purchasing power to negotiate for further discounts on prescription medication that manufacturers then refund after their drugs have been purchased. The contracts themselves are secret, but annual rebate totals are split into six categories within Medicaid Budget and Expenditure System reports available on the CMS website.

So to calculate the true cost of drug spending for each year from 2008 through 2016, we added those six rebate categories and subtracted the rebate total from the total drug spending. This is the same method used by the Medicaid and CHIP Payment and Access Commission, a government agency that provides policy and data analysis on Medicaid.

There are some potential weaknesses to this approach. First, the return of rebates to the states, by necessity, lags the purchase of those drugs. As such, some rebates for drugs purchased in the fourth quarter of a year were almost certainly paid in the following year.

Second, price data for medications for which fewer than 11 units were ordered per quarter has been withheld in the interest of patient privacy. When MACPAC compared 2014 spending with and without such information withheld, it discovered that only 0.9 percent of spending was missing. Thus the data slightly underestimates drug spending.

Finally, Medicaid data from the states is self-reported and is not verified by CMS. As such, misreported data almost certainly made its way into this analysis. As an example, Arizona Medicaid’s 2008 and 2009 drug utilization data was missing from CMS’s dataset.

The analysis revealed that from 2008 to 2016, nationwide Medicaid spending on drugs minus rebates nearly doubled, increasing from $16.2 billion to $30.1 billion.

Calculating drug spending per Medicaid enrollee

To determine whether rising drug costs simply reflected an increase in Medicaid enrollment, we sought national enrollment figures. CMS only began collecting data on Medicaid enrollment in 2013. But the Henry J. Kaiser Family Foundation, a nonprofit providing data, analysis and research on health policy, collected such data from two different CMS reporting systems and the California Department of Health Care Services.

Enrollment was measured in slightly different ways in each system. The enrollment counts from 2008 through 2014 represent anyone who had at least one day of Medicaid coverage in the year, while figures from 2015 through 2016 represent the highest monthly enrollment in the year. As such, it’s likely the 2015 and 2016 data slightly undercounts the maximum number of Medicaid enrollees in each year. Additionally, full data for a handful of states was unavailable in 2012 or 2013 so Kaiser used data from the previous year.

We then divided the previously calculated drug spending by Medicaid enrollment for each year. The analysis revealed that between 2008 and 2016, nationwide Medicaid spending on drugs per enrollee minus rebates increased from $273 per enrollee to $405 per enrollee, an increase of nearly 50 percent.

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