3 states pool drug buying Maine, Vt., Iowa save money as consortium

The federal government has given the nod to a Maine-led prescription drug-buying collaborative that allows the states of Maine, Vermont and Iowa to pool their Medicaid drug orders, using their combined financial clout to pressure drug makers into lowering prices, according to Gov. John Baldacci’s office.

The collaborative, named the Sovereign States Drug Consortium, began purchasing drugs in November 2005 and already has saved Maine’s Medicaid program more than $1 million, according to Jude Walsh of the Governor’s Office of Health Policy and Finance. The current Medicaid drug budget already reflects that savings, Walsh said, so it was a relief to hear that the federal Center for Medicare and Medicaid Services had approved the arrangement.

The governor is scheduled to make an official announcement of the arrangement at a press conference at the Dirigo Pines retirement community in Orono this afternoon.

The consortium allows the participating states to contract directly with 58 different drug makers for more than 1,300 medications, Walsh said. It also limits the role of the professional drug-purchasing organizations known as pharmacy benefits managers, ensuring that all negotiated savings are passed on to the states.

Goold Health Systems, which administers pharmaceutical benefits for Maine’s Medicaid program, will support officials from all three states with data analysis and negotiations, Walsh said, but will not benefit financially from the negotiations.

Walsh pointed out that the CMS decision allows states to negotiate lower prices with drug companies while the contentious legislation that created the Medicare Part D drug benefit specifically bans the federal government from such negotiations. Walsh said several other states have expressed interest in either joining the Sovereign States collaborative or forming their own buying groups with other states.

Seven states already belong to a buying group called the National Medicaid Pooling Initiative, administered by the for-profit company First Health Services.

Walsh said buying collaboratives help participating states continue to negotiate effectively with drug companies after the Jan. 1 startup of the Medicare Part D plan. Before Part D, states purchased medications for their “dual-eligibles” – residents who are enrolled in both Medicare and Medicaid, she explained. In 2005, Maine spent a total of $300 million on prescription drugs in the Medicaid program, $120 million of which was for dual-eligibles.

Since the plan took effect, dual-eligibles’ drugs have been purchased through the federal Medicare program, leaving states with fewer people to purchase drugs for, and a subsequent loss in negotiating power, Walsh said.

“Maine lost $120 million in buying power,” she said. “So in order to have the same negotiating clout, we needed to team up with some other purchasers.”

Walsh’s counterpart in Vermont, Ann Rugg, said the Green Mountain State explored several pharmacy purchasing groups before signing on with Maine and Iowa. The self-administered nature of the Sovereign States Drug Consortium makes it easier for states to offer an extensive list of medications and still save money, she said.

“Because Vermont, like Maine, has expanded its Medicaid program in recent years, we have to do everything we can to contain costs while continuing to provide clinically appropriate medications and services,” Rugg said.

In Des Moines, Susan Parker, pharmacy consultant for the Iowa Department of Human Services, said the state anticipates saving about $1.8 million a year by purchasing drugs through the consortium. Parker said Monday that the Augusta-based company Goold Health Systems recently contracted with Iowa to administer Medicaid benefits as it does in Maine, simplifying Iowa’s decision to join the collaborative.