News Release
FOR IMMEDIATE RELEASE Thursday, April 22, 2004 |
Contact: CMS Public Affairs (202) 690-6145 |
HHS Approves First-Ever Multi-State Purchasing Pools for Medicaid Drug Programs
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.
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.
HHS has also defended the legal right of states to use these
techniques. Earlier this month, the department won an
important legal victory in the Circuit Court of the District of
Columbia. The appeals court upheld a lower court ruling to allow
states to continue to use preferred drug lists in their Medicaid
programs.
All five of the states in today’s announcement have signed
agreements with First Health Services Corp., a pharmaceutical
benefit manager, to negotiate lower prices on their behalf with
manufacturers. Other pharmaceutical benefit managers provide
similar negotiating services. 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 some overlaps on the
preferred drug lists, pooling across states can lead to larger
discounts on certain drugs.
Medicaid is a state/federal partnership program that provides
health care coverage to over 41 million low-income children,
elderly and disabled Americans. Over $280 billion was spent
on the Medicaid program in 2003.
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Note: All HHS press releases, fact sheets and other press materials are available at http://www.hhs.gov/news.
Last Revised: April 22, 2004
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