Medicaid and the Unconstitutional Dimensions of Prior Authorization

The political outcry over prescription drug costs has been one of the most vociferous in recent memory. From tales depicting renegade seniors sneaking cheap prescriptions of Vioxx out of Tijuana across the border, to the promises of reduced prices made by front-runners during the 2000 Presidential election, the calls for lower drug prices have been forceful and demanding. This war for lower-priced pharmaceuticals fought by consumers, interest groups and politicians against the pharmaceutical industry itself has recently developed yet another front. The latest battle is over Medicaid. The new victims are the poor. Presently, federal statutory provisions in the Medicaid program provide relief from high drug prices through a mandatory rebate mechanism. Federal law requires pharmaceutical manufacturers to rebate their drugs sold to Medicaid recipients at a minimum level of 15.1 percent of the average manufacturer’s price of those drugs. In addition to the mandatory rebate, federal law provides for the discretionary provision of prior authorization by which the states may serve the best interests of their Medicaid recipients in a cost-effective manner. The federal Medicaid program allows states to condition prescription of a covered drug on special prior authorization of that drug with a state official. Both the mandatory rebate and prior authorization provisions serve to balance access and cost in’ an attempt to provide necessary care for the indigent.