Rep. Leitner urges prioritizing generics in Medicaid to cut drug costs; fiscal office warns rebate trade-offs
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Summary
Representative Leitner urged committee approval of HB 4839 to prioritize generics and biosimilars in Medicaid, citing sample savings; House Fiscal said Michigan pays roughly $4.1 billion in pharmacy costs with $2.4 billion in rebates and estimated gross savings of $50—00 million but noted lost rebates could reduce net savings.
Representative Matt Leitner told the House Appropriations Committee that House Bill 4839 would require Michigan's Medicaid program to prioritize generic drugs and biosimilars over brand-name versions, while preserving prescriber authority to order "dispense as written" when medically necessary.
"The goal is to enhance cost effectiveness, maintain clinical quality, and support sustainable health care delivery," Leitner said, arguing that even a small sample of six drugs used by patients with asthma, heart failure and diabetes could yield roughly $41 million in savings.
Kevin Korster of House Fiscal said the state's Medicaid program pays about $4.1 billion in pharmaceutical costs and receives roughly $2.4 billion in rebates, yielding a net pharmacy cost near $1.5 billion. He told the committee that shifting toward generics could lower gross drug spending substantially but would also reduce rebate revenue. "You'll see the Medicaid the cost that we pay for drugs go down significantly," Korster said, but he emphasized that "you would then also lose the rebates."
Korster's analysis estimated gross savings in a range commonly between $50 million and $100 million; depending on rebate impacts, he said the likely upper bound of general fund savings could be about $25 million.
Committee members questioned whether the bill's drafting assumed handwritten prescriptions and whether it should be updated for electronic prescribing. Representative Rogers asked that DAW language be modernized to avoid penalizing prescribers who use electronic systems; Leitner acknowledged that drafting adjustments could be made.
Members also pressed for clinical carve-outs. Representative Steckloff warned that limited generic availability for many cancer treatments could leave patients without options if the bill were applied too rigidly. Representative Farhat and others underscored preserving the physician-patient relationship and ensuring psychotropic and cancer medications are handled as exceptions.
Chair Bolin and members requested that the Department of Health and Human Services (DHHS) appear in a future hearing with detailed rebate-flow data and more granular fiscal analysis so the committee can assess net savings and budget impacts.
Ending: The committee heard extensive testimony and directed staff to return with additional fiscal detail and asked DHHS to present next week; HB 4839 was not voted on at the hearing.
