9 States, D.C. Form Group

States Join Forces to Reduce Drug Costs

Jan. 14, 2003 - A nonprofit organization, the National Legislative Association on Prescription Drug Prices, formally announced yesterday that they are moving forward with  nine states and Washington D.C. to establish a plan for negotiating lower prices for prescription drugs.

Involved are Connecticut, Hawaii, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, Vermont and the District of Columbia. They do not expect to have the program in operation until the end of 2003.

Their announcement yesterday came on the heels of a news release by the Kaiser Foundation that details the dire fiscal circumstances developing in all they states as they try to cope with skyrocketing Medicaid costs. States face massive budget shortfalls totaling at least $60 billion going into the next fiscal year. Medicaid costs average about 15 percent of state budgets.

This organization is one of several attempts by states to try new and innovative ways to meet the crisis created by drug costs. These states intend to hold down spending on medicines for millions of state employees and Medicaid beneficiaries by creating an organization designed to be immune to drug makers' promotions of many of their more expensive products.

"Prescription drug prices for states, businesses and individuals has been nothing but up," said Cheryl Rivers, executive director of the National Legislative Association on Prescription Drug Prices. The association is a coalition of state lawmakers from the Northeast who are pushing for lower drug costs. "Many of the states are experiencing their worst fiscal problems ever."

"We believe we can set up a competitive model that will offer improved quality and better prices," Rivers said.

Details of how the nonprofit would work are being worked out, Rivers said. The nonprofit would compete directly with pharmacy benefit managers, private companies now hired by scores of entities to negotiate discounts from drug manufacturers.

"We are still talking to our consultants about the best way to begin," Rivers said. The effort is being financed by the Heinz Family Philanthropies. "We're just going to try to offer a better service. We think the market is ripe for it."

"New York has the most to gain," from the new organization, said Peter E. Shumlin, chairman of the National Legislative Association on Prescription Drug Prices told the New York Times. Mr. Shumlin, a former Vermont state senator, said New York "is doing the least of all the states" in his group to hold down drug spending.

The program probably will face opposition from the pharmaceutical industry as well as pharmacy benefit managers. Some of the pharmacy benefit companies face allegations they pocketed discounts that should have gone to states.

Jeff Trewitt, a spokesman for Pharmaceutical Research and Manufacturers of America, which represents drug companies, told the Associated Press his organization opposes the inclusion of Medicaid in such a plan.

"Medicaid is already a well-established program that already gets the best prices," Trewitt said. "It should be left out of this new effort."