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By MILT FREUDENHEIM, NY Times
January 14, 2003 In
the strongest challenge yet in the battle between the states and the
manufacturers and distributors of prescription drugs, nine states and the
District of Columbia are organizing a joint nonprofit operation to manage
their prescription plans, officials in charge of the effort said
yesterday.
The
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.
The
new organization is being formed at a time when two-thirds of the states
are reducing Medicaid coverage, restricting eligibility or ending benefits
altogether for at least one million people. A study by the Kaiser Family
Foundation issued yesterday said state Medicaid directors expected further
cuts in benefits and eligibility.
Dozens
of states are facing their largest deficits in years. Their combined
shortfall for the current fiscal year is estimated at $45 billion, and the
deficit for next year is projected to increase sharply, reaching 20
percent or more in some states.
Health
care spending is a major part of the financial problems the states face,
and drugs are the fastest growing component.
New
York, for example, spent $2.4 billion on prescription drugs for more than
3 million Medicaid recipients in 2001, 7.5 percent of all its Medicaid
spending and an increase of 75 percent from 1998.
"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, the group that is organizing the new benefit plan. 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
new drug benefit manager will try to help New York and the other eight
states — Maine, Massachusetts, Connecticut, Rhode Island, Vermont, New
Hampshire, Pennsylvania and Hawaii — maximize the drug benefits they can
provide given their current budget constraints.
Drug
benefits for the state employees and Medicaid recipients in most of those
states are currently managed by private companies called pharmacy benefit
managers. Under their current contracts, these drug plan managers pocket
sizable undisclosed payments, known as rebates, from drug makers in return
for promoting certain drugs. They then create lists of drugs, called
formularies, for different ailments and often set prices that induce drug
plan members to opt for the drugs that have been promoted.
At
least three of the largest drug benefit managers, Medco Health Solutions,
AdvancePCS, and Express Scripts, have special deals with drug
manufacturers that require them to create financial incentives for
Medicaid recipients to use certain prescription drugs, many of them quite
expensive.
By
managing their drug benefit programs themselves, the states intend to keep
any drug company payments for themselves. They plan to use medical experts
to help them determine the most cost effective and appropriate drugs to
offer, often supplanting the ones promoted most heavily by drug makers.
The
states also plan to ask their attorneys general to review the fine print
on their existing prescription drug contracts to make sure that programs
for low-income and uninsured residents receive the full benefit of price
discounts already negotiated with drug makers.
State
consumer fraud and antitrust investigators in New York, Connecticut, Maine
and several other states are already examining existing state contracts
with Medco, AdvancePCS, Express Scripts and other pharmacy benefit
management companies that provide drug benefits for 200 million Americans.
The
new drug benefit manager will compete with private pharmacy benefit
managers, all of them creating lists of drugs at attractive prices. That
way, the states sponsoring the new organization will have a choice of
lists of preferred drugs at discounted prices, said Mr. Shumlin of the
National Legislative Association.
Other
states have created programs to try to rein in their prescription drug
costs. Michigan has tried to use the federal Medicaid law as leverage to
force drug manufacturers and wholesalers to sell their products in the
state at discounted prices. Maine offered Medicaid program discounts to
people who did not qualify for Medicaid, and Florida obtained extra
rebates from manufacturers. Drug companies have challenged the plans in
court, with varying results.
Some
states, including New York, have never had a preferred drug list for
Medicare recipients. Richard N. Gottfried, chairman of the New York State
Assembly health committee and a member of the legislative association
planning group for the new drug plan manager, said the state could
generate "enormous savings" by selecting a list of preferred
drugs and obtaining discounts for Medicaid and other health care programs
for women and children.
The
organizers say the new nonprofit plan would include coverage for
mail-order prescriptions and for importing drugs from Canada, where the
government keeps prices low. American drug manufacturers and a New York
state pharmacy group have objected to previous state efforts to import
prescription drugs from Canada. GlaxoSmithKline warned on Friday that it
would stop supplying drugs to Canadian enterprises that ship them to the
United States.
Bruce
Lott, a spokesman for the Pharmaceutical Research and Manufacturers of
America, a trade group, said his group opposed any program that would buy
drugs for a pool that included both Medicaid and non-Medicaid plan members
like state employees. "The Medicaid program already receives the
manufacturers' best price, and the Medicaid program and Medicaid patients
would not benefit from inclusion in such a pool," he said.
The
Heinz Family Philanthropies, a charitable group, is paying for planning
for the nine-state plan. Jeffrey Lewis, executive director of the
foundation, said the states hoped to farm out most of the operations, like
processing payment claims and selecting networks of pharmacies.
Cheryl
Rivers, executive director of the National Legislative Association, said
the new organization would develop its preferred drug list itself to guard
against undisclosed behind-the-scenes arrangements that could benefit drug
manufacturers.
She
said the mere existence of the new plan would lead to better pricing from
commercial pharmacy benefit managers. "We are already starting to see
some of that," she said.
The
big pharmacy benefit managers said they would welcome new competition.
"We always look forward to competing," said Steve Littlejohn, a
spokesman for Express Scripts. The states "can make informed
decisions in selecting the plan that makes most sense for them." Dale Thomas, a spokesman for Advance, said, "AdvancePCS views any efforts to organize a coalition using the tools of the P.B.M. model as yet another validation of the industry's success." Copyright
© 2002 Global Action on Aging
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