Stretching State Health Dollars in Difficult Economic Times: Pharmaceutical Purchasing Strategies Tanya Alteras Economic & Social Research Institute Families USA, January 28, 2005 Washington, D.C.
Mar 27, 2015
Stretching State Health Dollars in Difficult Economic Times: Pharmaceutical Purchasing Strategies
Tanya AlterasEconomic & Social Research Institute
Families USA, January 28, 2005Washington, D.C.
"The chance of dramatic [national] reforms are next to zero. . . .
Like it or not, we are stuck with what we have for the foreseeable future."
-Rep. Tom Feeney, R-Florida, November 3, 2004
In the face of less-than-likely national reforms, states will continue to pursue state- and community-based solutions to the health care crisis.
State Responses to Skyrocketing Health Costs
Two General Strategies: Address cost increases in Medicaid/SCHIP/state health
programs by: Cutting eligibility, benefits, reimbursement to providers Raising premiums and other cost-sharing
Stretch health dollars to expand health care access, coverage, and efficiency by: Leveraging private &/or federal dollars More effective purchasing, cost-effective primary and preventive
care, better management of diseases
Why Rx Purchasing Strategies?
States estimate an average of 14-15% annual increase in Medicaid Rx spending from 2001-2004
Need to make Medicaid and other state Rx purchasing more affordable
Desire to expand Rx programs to vulnerable populations
Common Theme Across Various Effective Purchasing Strategies:
States pooling together and using evidence-based research to guide their pharmaceutical purchasing in order to reduce costs and increase efficiency.
Typology of Identified Strategies
Substitutions, Preferred Drug Lists (PDLs), and supplemental rebates
State-negotiated discounts Multi-state purchasing & evidence-based
research collaboration Intrastate purchasing Multi-state drug re-importation collaboratives
National Medicaid Pooling Initiative
MI, VT, NH, NV, AK, MN, HI Common PBM pools purchasing power to
negotiate, get supplemental rebates from drug companies tied to volume
Give smaller states purchasing benefits of larger states
Enhances savings from PDLs: MI savings: $60.5m from PDL, $7.2m from rebates
(expected to increase as pool grows)
RXIS: Multistate Rx Purchasing Pool
WV, MO, NM, DE, OH
Common PBM negotiates rates for state workers, SCHIP (only in WV).
States pays higher admin but capture entire rebates
WV saved $7m year 1, expect $25m over 3 years
Drug Effectiveness Review Project
Overseen by the Oregon Center for Evidence-Based Policy
States pool resources to evaluate pharmaceuticals in 25 drug classes
Set standards for comparing drug effectiveness (use for PDLs)
Focusing on clinical outcomes 11 states participating as of July 2004
Maine & Hawaii Rx Plus
State-negotiated discounts for residents to 350% FPL w/o drug coverage
Estimated savings of 15% for brand Rx, 60% for generics on PDL
In ME, program survived legal battles by pharmaceutical industry
HI plan began on July 1, 2004
Georgia Consolidated Drug Management
State contracts with one PBM for multiple state agencies and programs’ Rx benefits, covering almost 2 million residents
One PDL established across all programs
Rx cost growth trend line reduced from 26% in FY 2001 to 16% in FY 2002.
I-Save Rx
IL, MI, WI, KSMulti-state program using reimported
drugs from Canada, Ireland and UKStates contract with CanaRx (PBM)Currently 1,200 enrollees
Next Steps and Issues to Consider
Broadening programs to include additional states
Deepening discounts and increasing rebates to make programs even more cost-effective
Impact of Medicare Part D on state-based Rx programs
Ensuring the use of evidence-based research in developing cost-savings strategies
Challenges from pharmaceutical industry
Overall Lessons Learned
Some strategies do not have high short term costs, but redirect current funding streams opposition…
Building consensus and “buy in” among stakeholders is critical
Some strategies require up-front investments ($ and time investment) But must factor in financial and health-outcomes related benefits
over the long term
Need to address budget shortfalls w/ creative financing models… Requires “outside-the-box” thinking
Most of these state strategies help in an incremental way… Significant impact requires comprehensive, combination approach
(or national commitment)
*** States must be active players ***