When CMS on Jan. 8 approved Tennessee’s Section 1115 Medicaid waiver — making it the first state to try an “aggregate cap” approach to Medicaid financing — the agency also took the unprecedented step of authorizing Tennessee to set up a “commercial-style” closed drug formulary while still receiving statutory Medicaid drug rebates for covered drugs.

“I think this piece will be particularly controversial and potentially quite ripe for litigation,” says Jocelyn Guyer, a managing director with Manatt Health. “It’s a foundational change that we’ve never seen before in a Medicaid waiver.”

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• RADAR on Drug Benefits