How We Approach New York’s Unique Medicaid Programs

New York Medicaid operates multiple programs with the goal of reducing net expenditures for its pharmacy utilization.  The state’s Preferred Drug Program (PDP) has been in effect for nearly 20 years, but two other initiatives also pursue supplemental rebate contracts.  The State Drug Cap program (SDC) began in 2017 as a result of Public Health Law 280.  The High-Cost Drug program (HCD) was started in 2020, a product of Social Services Law 367-a.  Both efforts specifically target pharmaceuticals with high projected impact on net pharmacy spend, but from different perspectives. 

As described on the state’s Medicaid website, New York begins the annual SDC process by projecting its net cost for drug expenditures for the upcoming fiscal year.  If the state believes that this amount will exceed the cap calculation for the fiscal year, it then identifies products that are among the highest contributors to that excess.  The manufacturers of these products are sent a solicitation letter that directs them to contract for a discount with the state, in compliance with state law.  This letter contains a recommended target discount percentage.

The HCD process has a different description in law, but receipt of a solicitation letter is still the starting point for affected manufacturers.  While the SCD focuses on products already established on the market, the HCD approaches manufacturers of products that are newly launched.  Of the selection criteria in SSL 367-a, the state most frequently solicits products that exceed $30,000 per year or per treatment course.  As with the SDC, product selection is not limited to pharmaceuticals dispensed through pharmacies; medical-administered products are also within the programs’ reach.  Projecting state targets in the HCD is reliable – a manufacturer will be called to participate if its new launch price exceeds the established threshold!

As manufacturers determine their next steps, here are some frequently asked questions with our responses:

• Can I schedule an appointment with the state to discuss the solicitation letter?
  • No, the state directs Magellan, its rebate contracting vendor, to handle all communications.
• Is the recommended discount negotiable?
  • Yes, the state has previously demonstrated a willingness to negotiate the discount.
• If I contract through the state-specific program, will other contracts accessible to New York be terminated?
  • No, the state views these programs as additional options; they may be eligible to access multiple contracts, but only intend to access one.
• Will I gain enhanced access for my product if an agreement is reached?
  • No, the legislation does not address access, and the state historically has not accepted contract language that enhances access.

New York’s Medicaid department largely adheres to the letter of the law regarding the SDC and HCD programs, but there is nuance to the paths that manufacturers can take in response.  With those paths come different levels of risk. 

We are ready and available to assist manufacturers with navigating interactions with the state and its vendor to a successful outcome regardless of the route chosen.  Please contact us for more information.