FRANKFORT, Ky. (Dec. 21, 2004) – A circuit judge declined Tuesday to block a new regulation on how Medicaid drug prices are set, allowing the Cabinet for Health and Family Services to move ahead with an initiative to save money on pharmaceuticals.

The ruling by Franklin Circuit Judge Roger Crittenden came in a lawsuit filed by the Long Term Care Pharmacy Alliance and the Kentucky Pharmacists Association against the cabinet. The pharmacy groups were seeking an injunction to halt the new cost-saving measure that took effect Dec. 4.

“We’re very pleased with the judge’s ruling that will allow us to pay a fair market price for medicines used in the Medicaid program,” said Health and Family Services Secretary James W. Holsinger Jr., M.D. “This is a win for taxpayers and Medicaid members that will help us continue delivering quality Medicaid services at a reasonable cost.”

The cabinet argued that under the old reimbursement system, it was forced to pay prices far in excess of prevailing market prices. The new system lowers the price ceiling on certain generic drugs and will save approximately $20 million annually.

Prescription drugs costs exceed $750 million a year and are a leading expenditure in the $4.6 billion Medicaid program. The cabinet has been working on several modernization initiatives to improve the quality of services and save money. Medicaid provides health services to approximately 680,000 Kentuckians. Medicaid programs across the nation are in crisis, as the spiraling costs of the joint federal-state health program threatens to overwhelm state budgets.  Kentucky faces a $526 million Medicaid shortfall for this fiscal year.

Governor Ernie Fletcher announced earlier this month plans for Kentucky to save millions of dollars by joining a multi-state drug purchasing pool. He also announced improved safety features to protect members who are getting medications through Medicaid’s new pharmacy benefits administrator, First Health Services.

“As a cabinet we are very pleased with our new pharmacy benefits administrator, First Health Services,” Holsinger said. “This is the first of many efforts to deliver 21^st century care at a reduced cost through Kentucky’s Medicaid program.”

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