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States Form Coalitions to Leverage Lower Prescription Drug Prices

Donna Young

With Congress shifting its attention to the needs created by the terrorist attacks and the economic downturn, federal action for publicly funded prescription drug programs has been stifled.

But states are moving ahead with legislation and programs of their own.

Several states have created coalitions for the sole purpose of buying drugs in bulk for the prescriptions of state employees and other enrollees in publicly funded health plans.

The coalitions hope to use their collective buying power to negotiate cost-cutting deals with pharmaceutical companies, according to government officials.

Proximity is not a prerequisite. During its 2001 session, the West Virginia legislature passed the Prescription Drug Cost Managing Act, which authorizes the director of the state’s Public Employees Insurance Agency (PEIA) to "manage the steady increase in prescription drug costs."

West Virginia has been part of a 15-state work group that has met over the past year to discuss issues related to prescription drug costs.

In October, the state issued a request for proposals to hire a pharmacy benefits manager (PBM) to strike deals with drug makers and manage contracts for a multistate drug purchasing pool.

Six states—Louisiana, Maryland, Mississippi, Missouri, New Mexico, and South Carolina—are planning to join West Virginia in the buying pool.

Henry Curran, assistant executive director for the Missouri Consolidated Health Care Plan, said his state has been searching for other parties with which to form a buying pool.

"When you buy together, you have the opportunity to buy at a better price," he said.

Tom Susman, West Virginia PEIA director, said his state is responsible for overseeing the PBM contract. But, he said, representatives from each state in the pool would meet and analyze the proposals before a final decision about the contract is made in March.

"Pharmacists will be very much a part of that process," Susman said. "Our pharmacy benefits person is a pharmacist, and that person will be involved in the evaluation committee. It will be up to the other states whether they will also include pharmacists on the panel. But I’m sure they will."

West Virginia plans to implement the program in July.

"Each state will have different target dates, depending on other contracts they have for their health plans," Susman said.

Rob Tester, director of the South Carolina Employee Insurance Program, said his state must get approval from its budget and control board before joining the buying pool.

"We are waiting until after the selection process is completed, and if it looks good, we will take it to our board," he said.

Susman said the seven-state coalition plans to invite private employers and other state and municipal agencies to join the buying pool.

"We will be networking and inviting people in," he said. "The groups don’t have to be states. The plan is not state related, but more size related. We want to reach out to large employers. . . . The whole idea is to have a joint purchasing strategy to control the costs of drugs."

Susman said his state is hiring up to eight pharmacists for a counterdetailing program to promote the use of generic drugs as another cost-saving measure.

Florida initiated a similar counterdetailing program last year for its Medicaid prescription drug program.

States join together. The New England states of Maine, New Hampshire, and Vermont joined together last summer to form a prescription drug coalition aimed at controlling the cost of drugs covered under the states’ Medicaid programs.

Senators and representatives of eight states—Connecticut, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, and Vermont—have formed the Northeast Legislative Association on Prescription Drug Prices to leverage discounted costs on drugs for residents of these states.

Cheryl Rivers, the association’s executive director, said states will have to be the "innovators and engines" to lead the way for prescription drug programs.

"We are going to have to hang together or hang separately," she said. "There is no reason for all of us to reinvent the wheel. We can share the best information and find the best approach and then cooperate together to replicate it. I don’t waste a lot of my time worrying about when the federal government is going to do anything. We must foster cooperation among states and move forward now."

Rivers, a former Vermont legislator, served as chairwoman of the state’s senate finance committee. She resigned her senate seat in October to head the coalition.

"I really feel that a concentrated effort of a good organizer can make a difference," she said. "The cost of prescription drugs is an urgent and important issue for many citizens. And I am strongly committed to the issue."

The Northeast states’ program is meant to "work across public and private programs," Rivers said.

"Each state will have the option of what programs they want to include, whether it be Medicaid or any other supplemental program," she said. "The concept is that all citizens should have access to lower drug prices. We want to maximize our ability to shift market prices."

The eight-state coalition plans to meet in Pittsburgh on January 11 to discuss the status of each state’s existing prescription drug programs, Rivers said.

"Before you can move forward, you have to understand your current status," she said.

The Northeast coalition hired Brandeis University of Waltham, Massachusetts, in November to advise the states on policy issues.

Rivers said the coalition is in the process of trying to identify the type of company it wants to provide claims processing and negotiation services.

"We want to avoid some of the practices of the PBMs since some of them are owned by drug companies and they have their own motives," she said. "There are many companies out there that will help us develop the right services. And what will come out of it will be a unique brand of service."