HHS Secretary Tommy G. Thompson today approved plans by five states to pool their collective purchasing power to gain deeper discounts on prescription medicines for their state programs. The multi-state purchasing pool plans approved today include Michigan, Vermont, New Hampshire, Alaska and Nevada. This is the first time in the history of the Medicaid program that states have worked together in this manner.
While states are not required to offer prescription drugs through Medicaid, all states do. However, continued escalation in the cost of providing prescription medicines has strained many state Medicaid budgets. Today’s historic action will give states unprecedented leverage in negotiating with drug manufacturers for lower prices. As part of our efforts to help states identify ways to reduce costs while improving quality, CMS will soon provide guidance to states on forming new purchasing pools and joining existing purchasing pools.
“By using the proven technique of negotiating lower prices, states will reap important savings on their drug costs,” Secretary Thompson said. “The ability to purchase drugs at a lower cost will help states continue to provide critical medications to the millions of low-income citizens who depend on the Medicaid program.”
Michigan, which began operating a joint purchasing pool with Vermont last year, estimates that it will save $8 million in its Medicaid program in 2004 as a result of the arrangement. Vermont reports that its Medicaid program will save $1 million in 2004 because of the purchasing pool. Other saving estimates include: Nevada: $1.9 million in 2004; Alaska: $1 million in 2004; and New Hampshire $250,000. Altogether, the pooled purchasing program will cover approximately 900,000 beneficiaries.
“This new 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 Center 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 approved 22 state plans to negotiate extra, or supplemental rebates with manufacturers. States generally achieve negotiated discounts greater thanthose 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.