News Release
FOR IMMEDIATE RELEASE
Thursday, September 9, 2004 |
Contact: CMS Public Affairs
(202) 690-6145
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HHS Approves Plans to Save Money on Prescription Drugs
Secretary Approves Minnesota, Hawaii Plans, Encourages States To Use Generics
HHS Secretary Tommy G. Thompson today approved plans that allow Minnesota and Hawaii to save money on prescription drugs by forming joint purchasing pools for their state Medicaid programs, the latest in the Bush Administration's efforts to reduce the price of health care.
Minnesota taxpayers will save an estimated $14 million and Hawaii taxpayers will save an estimated $4.1 million per year off the price of prescription drugs the states buy through the Medicaid programs, according to state estimates.
"President Bush is determined to make prescription drugs and health care more affordable for all Americans," Secretary Thompson said. "We are pleased Hawaii and Minnesota are taking steps to save taxpayers money by joining other states to save money on their prescription drug bills."
Minnesota and Hawaii join Michigan, Vermont, New Hampshire, Alaska and Nevada in the purchasing pool, which allows states to save money by banding together to negotiate lower prices on prescription drugs they purchase for their state Medicaid programs. Secretary Thompson approved the five others states in April 2004.
Additionally, HHS' Centers for Medicare & Medicaid Services (CMS) today sent letters to all state Medicaid directors providing guidance to states who wish to establish a similar pool. CMS also issued a paper today outlining other proven approaches that states can use to save money, including encouraging the use of generic drugs and implementing disease management.
States participating in the current pool maintain their own preferred drug list and exercise clinical oversight of those lists to assure adequate access to needed medicines for their beneficiaries. For certain drugs, pooling across state lines can lead to larger discounts. The Medicaid director letter tells states they must make sure their formularies provide adequate coverage for beneficiaries' drug needs.
"We are working with governors and legislators to identify and implement a full range of proven approaches to lowering prescription drug costs. While most states are taking steps to lower drug prices, many states have not yet implemented programs to encourage use of generic drugs and manage diseases and prescribing more effectively," said CMS Administrator Mark B. McClellan, M.D., Ph.D. "We are ready to help any state lower their drug costs safely right now."
A copy of the letter to state Medicaid officials on multistate drug purchasing pools is available at www.cms.hhs.gov/states/letters. The new CMS paper on proven approaches to lowering drug costs -- approaches that most states have not yet fully implemented -- is available at www.cms.gov/medicaid/drugs/strategies.pdf.
Also, HHS has taken steps to make generic drugs more widely available. However, many states are not yet taking full advantage of these generic drug savings. CMS found that the potentially significant cost savings has prompted 39 states to require that generic substitution be dispensed to Medicaid beneficiaries when one is available, though the states vary in the extent to which they are actually achieving very high rates of use of less costly generic versions when they are available. For example, even though generic drugs account for over half of all prescriptions nationwide, generic drugs have accounted for well under 50 percent of prescriptions in many Medicaid programs in recent years. The potential savings are important.
According to the Generic Pharmaceutical Association, the average price of a generic prescription drug is 70 percent lower ($22.79 compared to $76.29) than the price of the brand name version of the same drug, even though both drugs are chemically identical and have been proven to work in the same way.
In Minnesota, for instance, generic drugs must be dispensed if the generic drug has been approved by the FDA, the physician or pharmacist believes the generic to be interchangeable with the reference brand and if the generic drug is less expensive.
The Minnesota program has been in place for nearly a decade, and the state estimates that it will save $10 million in 2004 because of generics. Brand name drugs are available to Medicaid recipients with prior authorization.
Idaho, which instituted a generic substitution policy for its Medicaid program in 2000, estimates its generic substitution rate is around 53 percent for a savings of nearly $7 million in fiscal year 2003. Idaho's policy requires prior authorization for brand name drugs, which will only be used if a patient has failed to respond to at least two generic substitutes.
Another way states can save money is by using disease management programs, McClellan noted. Those programs can also improve care by helping people with chronic illnesses avoid health care emergencies. These programs help physicians monitor and educate patients about adhering to medication schedules.
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: September 9, 2004
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