Maine among 9 states forming nonprofit to lower drug costs

WASHINGTON – As states face large budget shortfalls from rising Medicaid costs, several, including Maine, are forming a nonprofit organization to negotiate lower prices for prescription drugs.

The organization, which is not expected to be operational before the end of the year, marks a growing trend by states to try innovative ways to deal with drug costs.

The new effort would affect Medicaid patients as well as scores of state workers.

It involves Connecticut, Hawaii, Maine, Massachusetts, New Hampshire, New York, Pennsylvania, Rhode Island, Vermont and the District of Columbia.

“Prescription drug prices for states, businesses and individuals has been nothing but up,” said Cheryl Rivers, executive director of the National Legislative Association on Prescription Drug Prices, which is organizing the effort. The association is a coalition of state lawmakers from the Northeast who are pushing for lower drug costs. “Many of the states are experiencing their worst fiscal problems ever.

“We believe we can set up a competitive model that will offer improved quality and better prices,” Rivers said.

That sentiment was echoed in Maine by two lawmakers who are delegates to the National Legislative Association on Prescription Drug Prices.

“We think the latest effort has the potential to greatly reduce the cost of prescription drugs,” said Rep. David Lemoine, D-Old Orchard Beach.

State Sen. Arthur Mayo, R-Bath, said that given Maine’s projected budget shortfall approaching $1 billion, “anything we can do to save significant dollars will be most helpful. This program has the potential of budget savings in the $50 million range.”

Just Monday, a study found that nearly all states have cut spending or plan to reduce spending this year on Medicaid, the nation’s health insurance for the poor. Overall, states face massive budget shortfalls totaling at least $60 billion going into the next fiscal year. Medicaid costs average about 15 percent of state budgets.

Details of how the nonprofit would work are being worked out, Rivers said. The nonprofit would compete directly with pharmacy benefit managers, private companies now hired by scores of entities to negotiate discounts from drug manufacturers.

“We are still talking to our consultants about the best way to begin,” Rivers said. The effort is being financed by the Heinz Family Philanthropies. “We’re just going to try to offer a better service. We think the market is ripe for it.”

The program probably will face opposition from the pharmaceutical industry as well as pharmacy benefit managers. Some of the pharmacy benefit companies face allegations they pocketed discounts that should have gone to states.

Jeff Trewitt, a spokesman for Pharmaceutical Research and Manufacturers of America, which represents drug companies, said his organization opposes the inclusion of Medicaid in such a plan.

“Medicaid is already a well-established program that already gets the best prices,” Trewitt said. “It should be left out of this new effort.”