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Three State Plans Approved to Leverage Buying of
Prescription Drugs
Plans approved for Louisiana, Maryland and West
Virginia
May 28, 2005 – Three states won approval from
Health and Human Services to pool their purchasing power in an effort to
gain larger discounts on prescription drugs for their state programs.
HHS Secretary Mike Leavitt on Friday approved plans by Louisiana,
Maryland and West Virginia This is the second multi-state purchasing
plan using the framework established by the Centers for Medicare and
Medicaid Services in 2004. The first multi-state plan, approved in April
2004, included five states: Michigan, Vermont, New Hampshire, Alaska and
Nevada. Since its approval, Hawaii, Minnesota, and Montana have joined
that original pool.
"These pooling plans will help lower drug costs for
the states involved," Secretary Leavitt said. "The ability to purchase
drugs at a lower cost will help the participating states continue to
provide critical medications to the millions of low-income citizens who
depend on the Medicaid program."
Louisiana estimates that it will save $27 million
in its Medicaid program in 2006 as a result of the arrangement. Maryland
reports that its Medicaid program will save $19 million in 2006 because
of the purchasing pool, while West Virginia expects to save $16 million.
Altogether, the pooled purchasing program will cover over 1.3 million
beneficiaries.
"This approach builds on our efforts to help states
use the best private- sector purchasing tools to lower costs, while
assuring appropriate standards for proper access to medicines and
quality care," said Mark B. McClellan, M.D., Ph.D., administrator of the
Centers for Medicare & Medicaid Services, which oversees the Medicaid
program.
Under the Medicaid law, drug manufacturers, in
order to receive federal funding for their drugs, must first enter into
discount -- or rebate -- agreements with HHS. The Bush administration
has currently approved around 30 state plans to negotiate extra, or
supplemental rebates with manufacturers. States generally achieve
negotiated discounts greater than those established by law for Medicaid
by relying on a private pharmacy benefit manager to negotiate discounts
based on a list of preferred drugs established by the state for their
Medicaid beneficiaries.
CMS has worked with each of these states to assure
effective implementation of price negotiations, including appropriate
consideration of clinical impact. In determining what drugs are on the
preferred drug list, states use a committee of clinicians and
pharmacists to review medical needs before considering the discounts
offered by drug manufacturers. The review ensures that the preferred
drug list will provide Medicaid beneficiaries access to all drugs
generally needed. In addition, federal law requires that drugs not on
the list may still be prescribed for Medicaid beneficiaries but often
require prior approval, generally leading to less utilization.
Consequently, drug manufacturers often provide additional discounts to
keep their drugs on the preferred drug list.
All three of the states in today's announcement
have signed agreements with Provider Synergies to negotiate lower prices
on their behalf with manufacturers. Although the states are pooling
their efforts in buying drugs, they all will maintain their own
preferred drug lists and exercise clinical oversight of those lists to
assure adequate access to needed medicines for their beneficiaries.
Because there are overlaps on the preferred drug lists, pooling across
states can lead to larger discounts on certain drugs.
In September 2004, CMS issued a State Medicaid
Directors letter giving guidance to states on how to implement
multi-state pooling arrangements that both achieve cost savings and
protect the interests of the Medicaid beneficiaries while promoting
competition.
Medicaid is a state/federal partnership program
that provides health care coverage to over 53 million low-income
children, elderly and disabled Americans. Over $295 billion was spent on
the Medicaid program in 2004.
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