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The process by which state Medicaid programs develop their preferred drug lists, and determine which medications require prior authorization, is opaque to many clinicians. This process is a synthesis of cost and clinical information. For cost, the federal Medicaid Drug Rebate Program establishes mandatory rebates that pharmaceutical manufacturers must pay state Medicaid programs. In addition, state Medicaid programs may also negotiate supplemental rebates whereby, in exchange for a preferred position on the preferred drug list, manufacturers pay an additional rebate. These supplemental rebates are most important in therapeutic classes with multiple brand competitors (e.g., medication treatments for opioid use disorder). For clinical information, state Medicaid programs convene pharmaceutical and therapeutics committees, drug utilization review boards, or both, composed of a variety of stakeholders such as practicing clinicians. Cost factors such as federal rebate calculations and supplemental rebate negotiations may lead to counterintuitive preferred drug lists, for example, a state Medicaid program requiring prior authorization for a generic medication but not for its brand equivalent (e.g., buprenorphine/naloxone products). Because of states’ reliance on rebates, mandates to remove prior authorization may have the unintended consequence of increasing costs significantly through the loss of rebate negotiating power. In the face of high and rising medication costs, state Medicaid programs are also implementing innovative policy approaches to maintain access and control costs, such as targeted rebate negotiation and value-based pricing. Through participation in state Medicaid program clinical advisory committees, individual clinicians can have a powerful voice. Interested clinicians should consider joining to inform policy and help ensure their patients’ needs are met.

How do state Medicaid programs determine what substance use disorder treatment medications need prior authorization? An overview for clinicians