Medicaid Drug Cap

Frequently Asked Questions – #5 – State Fiscal Year 2018-19

  • FAQs also available in Portable Document Format (PDF)


General Questions

Q1. Can you confirm that the State’s target adjustment from manufacturers is $30M across 42 drugs?

No, the $30M is not the State’s target adjustment associated with the 42 drugs referenced in slide 7 of the Medicaid Drug Cap Webinar. The $30M in slide 5 of this webinar refers to the incremental SFY 2018-19 statutory pharmacy savings target above the achieved level in the prior year. The Department reduced the $85M SFY 2018-19 savings target in PHL § 280, by the $55M savings achieved by the Drug Cap in SFY 2017-18, as the $55M in savings was already included in the SFY 2017-18 base pharmacy spend.

Was the driver, utilization or price increases? Or was the determination based on cost per script?

The driver of the projected excess above the Medicaid Drug Cap target (shown on slide 5 of the webinar) is a combination of the statutory savings target (reference in the question above), Managed Care pharmacy premium increases related to specialty drugs (e.g. rheumatoid arthritis, new HIV therapies, and antipsychotic agents), as well as unanticipated drug mix changes from SFY 17-18, which reduced overall rebate collections (i.e. new drugs with spend but low rebate levels).

Q2. How have the number of Medicaid (FFS and MMC) lives changed during the time period in question?

The Department accounted for enrollment growth in both Fee for Service and Medicaid managed care populations using historical data to develop a utilization trend and accounting for any relevant program related changes which may have impacted enrollment for the rate period.

MMC drug costs are increasing, while FFS costs are decreasing due to the additional populations that have been transitioned from fee for service to managed care. Managed Care enrollment increased by 105,248 people between March 2017 and March 2018, while Fee for Service enrollment decreased by 76,251 over that same period.

For more information on MMC and FFS enrollment, please see the Medicaid Global Cap Spending Reports, which are available on the Global Cap website.

Q3. Is the “Projected Excess (Shortfall)” of $74,723,793 based on WAC (gross) sales?

The projected excess of $74,723,793 is based on the amount that Medicaid Drug expenditures (net of all rebates) is projected to exceed the statutory Medicaid Drug Cap. This is shown on Slide 5 of the PowerPoint Presentation, which can be found here.

Q4. What is the “target amount of rebate” (if any) that the New York State Division of Budget is recommending to the State’s Drug Utilization Review Board (DURB)?

The New York State Division of Budget does not recommend a ‘target amount of rebate’ to the DURB. The DURB will recommend a target supplemental rebate, if and when a drug is referred to the DURB for review. Pursuant to PHL § 280(5)(e) in formulating a recommendation concerning a target rebate amount for a drug, the DURB may consider:

  1. publicly available information relevant to the pricing of the drug;
  2. information supplied by the department relevant to the pricing of the drug;
  3. information relating to value-based pricing;
  4. the seriousness and prevalence of the disease or condition that is treated by the drug;
  5. the extent of utilization of the drug;
  6. the effectiveness of the drug in treating the conditions for which it is prescribed, or in improving a patient's health, quality of life, or overall health outcomes;
  7. the likelihood that use of the drug will reduce the need for other medical care, including hospitalization;
  8. the average wholesale price, wholesale acquisition cost, retail price of the drug, and the cost of the drug to the Medicaid program minus rebates received by the state;
  9. in the case of generic drugs, the number of pharmaceutical manufacturers that produce the drug;
  10. whether there are pharmaceutical equivalents to the drug; and
  11. information supplied by the manufacturer, if any, explaining the relationship between the pricing of the drug and the cost of development of the drug and/or the therapeutic benefit of the drug, or that is otherwise pertinent to the manufacturer's pricing decision; any such information provided shall be considered confidential and shall not be disclosed by the drug utilization review board in a form that identifies a specific manufacturer or prices charged for drugs by such manufacturer.
Q5. Does the State keep drug development, cost/pricing and other data provided by the manufacturer confidential?

Yes. Pursuant to PHL § 280(6), all information given by a manufacturer will be considered confidential and will not be disclosed by the Department.

Does the DURB have a format or checklist for how it wants this data provided?

Pursuant to PHL § 280(6) this information would be provided on a standard reporting form developed by the Department.

Q6. What is the timeline and format of discussion?

Pursuant to PHL § 280, if the Department intends to refer a drug to the DURB, it will notify the manufacturer of such drug. The initial notifications were sent to affected drug manufacturers on 09/17/2018.

The Department will continue its negotiations with manufacturers in an attempt to come to an agreement and will communicate to the manufacturer if it intends to refer a drug to the DURB, or take other authorized action under PHL § 280.

If a drug is referred to the DURB for review, it will be apparent via a DOH web-site posting of the DURB agenda thirty (30) days prior to a DUR Board meeting:

Refer to the answer to Question #22 in FAQ #2 for information regarding the format of the DURB discussions.

Q7. Does the request for “voluntary supplemental rebate” fall under the current Medicaid supplemental rebate contract, or is it a completely different contract with the State of NY?

The State Direct Supplemental Rebate Contract Template has been used to effectuate rebates negotiated under the Drug Cap statute. This template can be found here, see SPA 14–38.

Q8. Is there a State Plan Amendment (SPA) available for viewing associated with the Drug Cap legislation?

Refer to the answer to Question #20 in FAQ #2.

Q9. How will the DUR Board (DURB) be evaluating products and do they apply different parameters to orphan drugs that only apply to small populations?

There DURB will evaluate drugs (orphan and non-orphan) consistent with PHL § 280, as outlined in the answer to Question #22 in FAQ #2.

Q10. In the flowchart of slide 6 in the SFY 18-19 Medicaid Drug Cap Webinar, one of the criteria to be considered for DURB referral is if the net spend is >$2.2M OR if the net cost/claim is >$13,000 the drug. The chart states these are the top 3% for all drugs. How did the department determine a threshold of 3%? Is this literally the drugs that fall within the top 3% of the overall drug spend or was there some sort of formula to decide top 3%?

The Department determined a threshold of the top 3 percent based upon statistical methods that analyzed both drug spend net of all rebates and net cost per claim. No formula was applied to drugs thereafter except for a credit to Manufacturers who provided discounts for other drugs in the Medicaid program.

Q11. Can we have the list of the other drugs and manufacturers targeted this year?

The Department will not disclose the list of drugs or manufacturers. Drugs will be identified if/when they are referred to the DUR Board. This will be done via a DOH web–site posting of the DURB agenda (hyperlink below) thirty (30) days prior to a DUR Board meeting:

Q12. Why are the criteria for the determination of which drugs made the list different from last year? For example: Net spend of >$2.2M this year, versus >$5M last year, new criteria this year of “net cost/claim >$13,000?

The process for determining drugs for potential DURB referral for SFY 2018-19 was consistent with SFY 2017-18, though SFY 2018-19 data was refreshed to account for actual experience in SFY 17-18. For both years, statistical methods (e.g. scatterplots and marginal histograms) were used that identify outlier drugs across multiple variables. In SFY 17-18 the statistical methods were applied only to one variable (net spend). The SFY 18-19 methodology broadened the initial criteria to consider low utilization/high cost drugs and only outlier drugs were identified for potential DURB referral.

Q13. Why is the number of drugs and manufacturers targeted this year (42 drugs and 25 manufacturers) so much bigger than last year (30 drugs and 12 manufacturers)?

The number of drugs and manufacturers is higher than last year for a couple of reason. One reason is the incorporation of net cost per claim when identifying outliers and the second one is the lowering of the net spend threshold, both of which are a result of successfully negotiating rebate agreements under PHL § 280 during SFY 17-18. Pursuant to PHL § 280, the Department cannot refer a drug with an existing supplemental rebate contract under the Medicaid Drug Cap to the DURB for the duration of the rebate agreement &8211; meaning that drugs identified in SFY 17-18 for which the Department successfully negotiated new rebate agreements are barred from DURB referral for the duration of the agreement.

Q14. Are products and manufacturers from last year also included in this year’s list of targeted drugs and manufacturers?


Q15. When (what is the date) is the DUR meeting corresponding to the drugs targeted for SFY 18-19? Will the portion of the meeting dealing with Medicaid Drug Cap targeted drugs be public or private? Will other manufacturers be present during the discussion of another manufacturers drugs?

Specific dates have not been determined. Drug Utilization Review (DUR) Board meeting dates and accompanying agendas are posted thirty (30) days prior to the scheduled meeting.

Consistent with the current process of conducting DURB reviews, the Department will work with its contracted experts to develop evidenced based reviews aligned with the statutory provisions in PHL § 280(5)(e). The DURB will make recommendations for target supplemental rebates based on these reviews, which will include publicly available information, information provided in the public comment portion of the DURB meeting, and the confidential financial information that will be reviewed in the (private) Executive Session portion of the meeting.

Please use the following link to periodically check for updates: and/or sign up for the Drug Utilization Review Listserv at:–l_listserv.htm so that you are updated when the DURB agendas are posted.

Q16. Will these rebates apply going forward only from the signing of the agreement, or will they also apply retrospectively? If retrospective, then to what date?

The effective date and terms of the rebate agreements pursuant to PHL § 280 will be determined by the Department and the manufacturer.

Q17. Did NY include in the analysis of target rebates, the rebates that a manufacturer provides in other therapeutic classes, for example, Behavioral Health? How was this quantified, if so, and what specific effect did it have on the target rebate amount?

Initially, the Department identified 87 drugs and 45 manufacturers for possible DURB referral, as indicated in Slide 8 of the SFY 18-19 Medicaid Drug Cap Webinar. The Department then evaluated rebate levels for other drugs made by these 45 manufacturers, by comparing rebates as a percentage of spend in their respective classes. Manufacturers were given credit where rebate levels for other drugs were more than 10 percent greater than the average rebate levels provided in the class.

As shown on Slide 7 of the SFY 18-19 Medicaid Drug Cap Webinar, manufacturers were credited $63M (state share) for providing rebates in other drugs in the Medicaid program. 20 manufacturers of 35 drugs were not identified for potential DURB referral because of this credit (shown on slide 8).

Q18. Did the state consider the WAC price trends on these products, as well as net sales trends on these products?

In determining drug costs and whether to seek additional rebate for a drug, the State´s share was evaluated. This is consistent with §280(3)(d), which indicates that prior to seeking an additional rebate, a drug´s actual cost to the state, net of current rebate amounts, will be considered, as well as whether the manufacturer of the drug is providing significant discounts relative to other drugs covered by the Medicaid program. If the State has determined that it will seek additional rebates, §280(4) enables the DURB to also consider the state´s net cost of the drug, amongst other things, as indicated in §280(4)(a)(b)(c).

As presented in the September 17, 2018 Webinar PowerPoint presentation (Slide 5), the Medicaid Drug Cap model is calculated based on the "Total State Rx Spend." The presentation is available on the DOH web–site posted here.

Q19. How did the state quantify the avoided medical costs and clinical effectiveness, and subtract those prevented costs from the target rebates?

The evaluation of whether a drug will reduce the need for other medical care, including hospitalization, will be done via the DURB review process, if and when a drug is referred to the DURB, pursuant to PHL §280(5)(e). The DURB may consider "offsets" in other areas of Medicaid spending when recommending a target rebate amount. Further, reductions in medical spending, reflected as savings within the Global Medicaid cap, will be considered in the financial calculations to implement more aggressive tools to address pharmaceutical spending to achieve financial targets.

Q20. How does the state determine what portion each targeted drug makes up of the overall drug premium cost paid to Managed Medicaid plans?

The State’s actuary develops an all-inclusive pharmacy rate by region and rate cell which is not specifically delineated drug. Aggregate assumptions are used to capture the projected experience of drug mix and utilization. Medicaid Managed Care plans submit claim encounter data to the State which is utilized as the historical base data in developing the pharmacy rate which is further adjusted for supplemental rebates, program policy changes, data completion factors, and trend. Although trends are rolled up by region and rate cell, they are specifically analyzed for the impact of high cost specialty drugs, new emerging therapies, and drugs exiting the market. Plan reported encounter data during the rate period allows for continued monitoring of actuarial assumptions within the capitated rate.

Q21. Is the rebate agreement each company enters into with the Department tied to 2018-19 utilization and therefore retroactive since we are halfway through the fiscal year?

Please see the answer to Question #16 of this document.

|top of page|

October 19, 2018