Md. uses buying power to save millions on drugs

$31 million: Maryland will save millions of dollars in the Medicaid program by winning rebates from drugmakers.

October 01, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

As pressure builds for governments to import medicine from Canada or take other measures to cut spending on prescriptions, Maryland is saving millions of dollars more than anticipated through an initiative to win rebates on drugs purchased domestically.

Although the state initially estimated it would save $20 million a year by developing a "preferred-drug list" for Medicaid patients, the program has been so successful that it expects to save $31 million, said Nelson J. Sabatini, who retires today as state health secretary.

The program was hotly debated when the state set it up, with advocacy groups fretting that it could prevent patients from receiving needed medication. But it has functioned fairly smoothly, according to some of those who were skeptical initially.

"This is one of the pleasant surprises," said Lori Doyle, director of public policy for the Community Behavioral Health Association of Maryland, a group representing mental health clinics. "By and large, things seem to be working out."

"We have not heard that many complaints," said Howard Schiff, executive director of the Maryland Pharmacists Association. "It seems to have been working pretty well."

The preferred-drug list, or PDL, has been adopted by a majority of states in the past few years, mimicking the way private insurers have lowered pharmacy costs.

When Maryland proposed to follow a similar strategy, however, there was controversy.

"There was a lot of opposition," said Sabatini, "because it meant - God forbid - that the state would start behaving in a business-like way."

Private health insurers have been negotiating discounts or rebates from drug companies for years. Insurers use their lists of preferred drugs as a carrot to drugmakers, who are willing to cut prices in exchange for increased sales. Patients pay either higher co-payments or the entire cost for drugs not on the insurers' lists, or formularies.

The Medicaid program, which serves low-income patients, can't force patients away from high-cost drugs by sticking them with a hefty bill. What it does do is try to get doctors to prescribe certain drugs and collect rebates from manufacturers whose drugs are on the list.

A committee of five doctors, five pharmacists and two consumers select the drugs. The panel considers the rebate offer as well as the effectiveness of the drug in making its choices. Beginning a year ago, it considered a class of drugs at a time - antidepressants, for example - and chose a few in each category to place on the list.

Besides the rebate, the program tries to steer patients to lower-cost drugs.

For example, Joseph Fine, director of pharmacy programs for the state Health Department, said the popular arthritis medication Celebrex costs the state $2.69 a pill, or about $80 for a month's supply. A generic anti-inflammatory, which works just as well for many patients, costs less than 5 cents a pill - an attention-grabbing difference in a time of spiraling drug costs.

The pharmacy bill for about 200,000 people covered by Maryland's Medicaid program (not counting those in Medicaid's HealthChoice program, who get their prescriptions through HMOs) has increased an average of 20 percent a year for the past five years, and now approaches a half-billion dollars a year before rebates.

Studies attribute the increase to a combination of factors, including a flood of new, more expensive drugs, an older population and increases in price for some medicines.

Preferred-drug lists in state Medicaid programs have had "a strikingly rapid spread," said Richard Cauchi, health care program manager for the National Conference of State Legislatures in Denver. The first state programs began in 2001, and nearly 40 states have adopted some form of preferred drug list, Cauchi said.

They were initially challenged by the Pharmaceutical Research and Manufacturers of America, the drug industry trade group, but federal courts upheld their legality in a Michigan case.

"We still think it's harmful to patients having government committees deciding which drugs are available and setting up an onerous appeals process for the patient to get what they need," said Wanda Moebius, a spokeswoman for the trade group.

Maryland was mindful of problems in other states in trying to set up a simple process for drug approvals, said Sabatini. Doctors can get payment for a drug not on the list by calling a toll-free number or sending a fax.

"We don't hassle the doctor, but he must make the call," said Fine, the director of the state pharmaceutical program.

Sometimes, a clinical pharmacist from First Health Services Corp., the company the state hired to administer the pharmacy program, will talk to the doctor about alternatives before approval is granted - but, if the doctor persists, the state approves.

Overall, about 90 percent of Medicaid prescriptions are filled with drugs that are on the preferred list.

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