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The Associated Press March 15, 2010, 6:54PM ET

NC Medicaid starts preferred drug list program

North Carolina's Medicaid office has created a list of drugs it wants physicians to prescribe as a way to discourage more expensive or less effective medications while saving tens of millions of dollars annually.

The state Department of Health and Human Services announced Monday the start of a preferred drug list similar to those used by private insurers and Medicaid in most other states. Officials say more than $90 million in federal and state money could be saved with the change.

Doctors for the state's nearly two million Medicaid patients will be urged to prescribe drugs on the list -- usually generic and lower-cost brand names that have been proven effective. A physician must get prior approval from Medicaid for all other drugs, with exemptions for those to treat HIV and AIDS and certain medications for children.

The idea is doctors will be discouraged from choosing drugs that are more expensive but don't provide any better treatment than drugs on the list. North Carolina also recently joined a multistate Medicaid consortium designed to leverage drug rebates and discounts from pharmaceutical companies.

The Legislature last year directed the department to carry out a preferred drug list if it was determined more voluntary initiatives didn't generate $25 million in savings to the state. The savings didn't materialize, department spokesman Brad Deen said.

The effort comes as the state Medicaid office is on track to spend $250 million more than the more than $2 billion budgeted this fiscal year due in part to higher than expected enrollment and the inability to get the federal government to approve quickly other cost-saving initiatives.

"The department is committed to providing effective treatment options for the citizens of North Carolina who rely on Medicaid for their health care, yet we must also be careful stewards of our increasingly scant resources," department Secretary Lanier Cansler said in a statement.

A preferred drug list has bounced around the Legislature for years. Then-Gov. Mike Easley's administration proposed the idea in 2002 but it never happened. Lobbyists for the pharmaceutical industry at the time argued that such a plan could prevent doctors from prescribing what they believed were the best drugs for their patients or could raise medical costs elsewhere.

The idea gained traction again last year as state revenues fell nearly 11 percent during the 2008-09 fiscal year and they had to fill a budget gap for this year that Democrats calculated at more than $4 billion.

"It's way to improve health care while at the same time saving the state and taxpayers money," said Adam Searing, which advocates on health care issues for the liberal-leaning North Carolina Justice Center.

Medications covered by the state's Medicaid program are on the current list, but some will be removed over time if a physician's advisory panel recommends alternative drugs are safe and effective, the department said.

Medications for the mentally ill also remain on the list, although some may be removed after a working group that includes outside mental health workers attempts to work out concerns, Deen said.

These medications are among the most expensive and physicians often work with a series of drugs with patients to find the right combination or dose.

"We are concerned that rather than basing the preferred drug list on the most effective medicine, it would be based on cost," said Jennifer Mahan with the Mental Health Association in North Carolina.

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