Stateline Story

States Buying in Bulk to Stretch Rx Dollars

  • February 01, 2005
  • By Erin Madigan

Wisconsin Gov. Jim Doyle (D) wants to expand a bargain shopping strategy buying in bulk to help 500,000 uninsured residents get better prices on their prescription medicine.

His plan would let uninsured Wisconsinites pay a small enrollment fee to join BadgerRx, the state's prescription drug bulk-purchasing pool, which currently is limited to state employees and private businesses.

Doyle, who unveiled the plan Jan. 12 during his state of the state address, said program participants would get the same lower drug prices negotiated for state employees and "benefit from the full buying power of state government."

Doyle's proposal to include regular citizens who lack prescription drug coverage in a state bulk-buying pool is an innovative tactic among efforts in a growing number of states to leverage the purchasing power of large groups of consumers, such as state employees, retirees and Medicaid patients, to get more affordable prices on prescription drugs. The pool saved Wisconsin $25 million on prescription drugs in 2004, said Melanie Fonder, Doyle's press secretary.

Some 20 states use bulk purchasing of medicines in some form to reduce inefficiencies and their bottom line. "The greater the number of people you're purchasing for, in theory, the better price you can get. So it's a way of containing costs without having to actually cut services or cut people. It's a way of just buying more efficiently," said Neva Kaye, a program director at the National Academy for State Health Policy in Portland, Maine.

Massachusetts was the first to authorize an ambitious statewide bulk purchasing plan in 1999, including regular citizens, but the program is not fully operational, according to the National Conference of State Legislatures.

Since then, states have expanded bulk-purchasing set-ups by looking beyond their borders to combine the purchasing power of their state Medicaid populations or state agencies. For example, Delaware, Missouri, New Mexico, Ohio and West Virginia have teamed up to buy medicine for their public employees. The five-state pool covers 700,000 people and has saved the states millions of dollars, NCSL reported.

Michigan and Vermont were the first to mount a joint effort in February 2003 to save money in Medicaid, the state-federal health care program for the poor and disabled. The federal government approved their plan in April 2004. Since then, Alaska, Hawaii, Minnesota, Nevada and New Hampshire also have joined the pool. All seven states contract with the same pharmacy benefit manager, First Health Services Corporation, to barter for better prices on their behalf. Kentucky and Montana are waiting for a federal OK to join.

In 2004, Michigan estimated that it would save $8 million; Vermont $1 million; Alaska $1 million; New Hampshire $250,000; and Nevada $1.9 million, according to the National Governors Association Center for Best Practices.

While the concept of buying in bulk is easy to grasp, policy analysts say it's not easy to put into practice because states often have to jump through substantial administrative, contractual and political hoops. South Carolina, for example, withdrew plans to join the Michigan pool in fall 2004 because of bureaucratic delays at the U.S. Centers for Medicare and Medicaid Services.

Securing lower drug prices for Medicaid is a priority for many states because spending on the program is rising at a double-digit clip and squeezing state budgets.

Another impetus for states to team up for bulk buying is that each will lose a chunk of purchasing power when poor, elderly beneficiaries switch out of state-run Medicaid drug coverage and into a new federal Medicare program. In January 2006 Medicare for the first time will provide drug benefits for seniors, although it's unclear whether the switch will save states any money.

Indeed, state legislators or agency officials in more than half the states said they expect the creation or modification of bulk-purchasing pools to be on the legislative agenda in 2005, according to a recent 50-state survey by the Health Policy Tracking Service in Falls Church, Va.

Other pooling arrangements being pursued across the states include:

  • In Washington, newly elected Gov. Christine Gregoire (D) on Jan. 19 called on the Legislature to authorize a bulk-purchasing consortium.
  • Following Michigan's model, Louisiana, Maryland and West Virginia are waiting for the federal government to approve a buying pool for their Medicaid programs. Pooling could be made easier because the three states already contract with the same pharmacy benefit manager, Provider Synergies.
  • In Georgia, Lt. Gov. Mark Taylor (D) is proposing something similar to Doyle's plan in Wisconsin. According to the Atlanta Journal-Constitution, Taylor wants residents more than 55 years old and working families that don't have health insurance to be able to join the Georgia Rx plan to buy commonly prescribed medications at the same price that the state pays under its insurance programs for employees.
  • Taking a slightly different twist, Connecticut state Sen. Edith Prague (D) introduced a bill that would develop a way to buy prescription drugs in bulk for state agencies from Canadian pharmacies.

Tags: Health, Economy