Healthy Skepticism Library item: 2177

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Publication type: news

States Seek New Methods To Lower Prescription Drug Costs
The Wall Street Journal 2001 Aug 8

Full text:

NEW YORK (AP)—Bedeviled by sharply rising prescription drug costs, states across the country are seeking new strategies for wringing discounts from pharmaceutical companies.

At the same time, states are attempting to expand prescription drug coverage to include low income residents.

“It feels pretty schizophrenic. On the one hand states are under pressure to provide drugs for the uninsured but they also have the rising costs of existing health benefits to contend with,” says Joan Henneberry, director of health policy at National Governors Association.

“States are doing what they can to leverage their buying power.”

Thursday, representatives of 11 states in a network called the Pharmacy Workgroup will meet in Atlanta to continue talks on a purchasing pool that would cover state employees and Medicaid recipients. Adding Medicaid recipients to the pool is more complicated, since it is funded by both the state and federal governments, and involves rebates from drug companies.

Late last month, a coalition of lawmakers from eight northeastern states met to work on a similar plan.

The Pharmacy Workgroup – which has attracted about 15 states – expects to have commitments from enough states by October. They would then begin the process of hiring a pharmacy benefit manager, said Tom Susman, director of West Virginia’s Public Employee Insurance Agency.

States Combining Buying Power Worries Industry

“Large buying consortiums distort the marketplace,” said Jeff Trewhitt, spokesman for the Pharmaceutical Research and Manufacturers of America, the industry trade group. “And if these consortiums are run by governments and have legislative power it is no longer a level playing field.”

Susman countered that pharmaceutical companies haven’t done enough to keep prices down.

“Drug costs in this country are ridiculous. If drug companies cut the money spent on advertising they could lower prices,” he said.

He expects significant savings to result from the pool, although just how much will depend on how many, and which, states decide to participate.

Several States Eyeing Possibilities Of Program

Missouri plans to be an initial participant. Its prescription drug costs for state employees skyrocketed 159% to $29.2 million from the first quarter of 1997 to the second quarter of this year.

“We are interested in anything that will bring down drug costs,” said Therese Hanna, Missouri’s state insurance administrator. “It is worth it to give up some autonomy if we can save significant funds.”

Maryland is waiting to see how the deal is structured. Its drug spending for employees soared 115% to $155 million in the five years ended in 2000.

“We are still analyzing and gathering data on the subject,” said Gladys Gaskins, Maryland’s director of employee benefits.