MichBio, BIO Urge Governor Whitmer To Veto Medicaid Drug Access Provision

MichBio and its national affiliate, Biotechnology Innovation Organization (BIO), submitted a letter calling on Governor Gretchen Whitmer to exercise her line-item veto authority to remove Section 1763 from the FY2027 Department of Health and Human Services budget (SB 878), warning that the provision could create unnecessary barriers to patient access, introduce significant regulatory uncertainty, and undermine Michigan's growing life sciences sector.  

While the legislation is intended to strengthen oversight of Medicaid prescription drug spending, MichBio and BIO argue that Section 1763 goes well beyond responsible fiscal stewardship by requiring the state's Medicaid Pharmacy & Therapeutics (P&T) Committee or Drug Utilization Review (DUR) Board to determine that a medicine is both "clinically appropriate" and "cost effective," based on its "net cost," before recommending placement on Michigan's Preferred Drug List. The organizations contend that these new standards are introduced without defining either term or establishing a transparent methodology for how they would be evaluated or implemented.  

The practical implications could be significant. 

For patients - particularly those living with rare diseases, cancer, neurological disorders, autoimmune conditions, and other serious illnesses - the provision could delay access to innovative medicines by adding a new layer of review before therapies become broadly available through Medicaid. Many of these patients have few, if any, treatment alternatives, making timely access to breakthrough therapies especially critical.  

The proposal also raises concerns for Michigan's life sciences industry. The state's biotechnology companies invest years - and often hundreds of millions of dollars - to discover, develop, and obtain regulatory approval for new therapies. Introducing vague cost-effectiveness standards into reimbursement decisions creates additional uncertainty regarding market access, potentially discouraging future investment in innovative medicines and reducing incentives to develop treatments for smaller patient populations. 

MichBio and BIO also caution that the legislation could place the state in the difficult position of relying on confidential supplemental Medicaid rebate agreements and proprietary pricing arrangements to determine a drug's "net cost." Without explicit safeguards, the provision could jeopardize commercially sensitive information protected under both the federal  Defend Trade Secrets Act and the Michigan Uniform Trade Secrets Act, while providing no guidance regarding how confidential pricing information would be reviewed, discussed, or protected during the formulary decision-making process.  

Another significant concern involves the use of cost-effectiveness methodologies, which frequently rely on Quality-Adjusted Life Years (QALYs) to estimate the value of medical treatments. Patient advocacy organizations and disability rights groups have long argued that QALY-based analyses can undervalue treatments for individuals living with chronic illnesses or disabilities. The National Council on Disability has concluded that there is sufficient evidence that QALYs are discriminatory - or potentially discriminatory - to warrant serious concern. Congress has similarly moved in recent years to prohibit the use of QALYs in certain federal healthcare decision-making.  

Importantly, MichBio and BIO emphasize that their request is not an objection to responsible Medicaid stewardship. Rather, the organizations support evidence-based formulary decisions that balance fiscal responsibility with timely patient access and maintain a predictable policy environment for innovation. They argue that clinical decisions should remain grounded in robust scientific evidence and individualized patient needs, rather than undefined cost-effectiveness thresholds that could delay access to life-saving therapies.  

For Michigan, the stakes extend beyond Medicaid policy. The state has worked for decades to build a nationally recognized biosciences cluster, attracting biotechnology companies, federal research funding, venture capital, and highly skilled jobs. Policies that create uncertainty around reimbursement and patient access can influence where companies choose to invest, conduct clinical research, and commercialize new therapies. As competition among states for life sciences investment continues to intensify, maintaining a predictable, innovation-friendly policy environment will remain essential to ensuring that Michigan patients benefit from the next generation of medical breakthroughs while preserving the state's position as a leader in biomedical innovation.