As NLARx documents, pooling the bargaining power of drug purchasers, like state Medicaid and state employee health plans, increases their individual leverage to negotiate cheaper prices from the industry.
- Multi-State Purchasing Pools: At least five multi-state bulk purchasing pools are currently negotiating lower prices from drug companies. As NLARx reports, Iowa, Maine, and Vermont created the Sovereign States Drug Consortium, and Oregon and Washington created the Northwest Prescription Drug Consortium. In 2006, it was estimated that Maine would save $5 million in state and federal Medicaid costs by participating in the purchasing pool. As Prescription Policy Choices reports, Oregon could save $17 million annually by combining the drug purchasing of all its state programs.
- Pharmacy Benefit Managers (PBMs): PBMs negotiate rebates and manage drug benefit programs on behalf of public and private health plans and many self-insured businesses. However, the PBM industry is highly corruptible. To get their drug on a health plan's benefit list or formulary, drug companies make payments to PBMs that are proportionate to how often the drug is prescribed. PBMs boost their profits by pocketing some or all of these payments instead of passing them along to their customers. Three PBM companies administer 80% of all private prescription coverage and pocket annual revenues exceeding $15 billion. Model legislation compiled by PPC and NLARx requires greater transparency of negotiations, disclosure of conflicts of interest, and new ethical standards. PBM laws in Maine and DC have been upheld by the federal courts.
- Pricing Reforms: Worries about price gouging and artificial price inflation on celebrity drugs are driving states to shed light on the pricing practices of pharmaceutical companies. Wisconsin and Colorado laws prevent unfair and discriminatory pricing of prescription drugs, particularly during emergency situations. Maine law requires disclosure of manufacturer prices and "best price," and West Virginia created the Pharmaceutical Cost Management Council in 2004 (HB 4084) to continually examine the cost of prescriptions and develop ways to reduce prices in the state. Model legislation compiled by NLARx includes the Excessive Drug Pricing Act and the Drug Retail Price Disclosure Bill.
Resources:PBMs Transparency and Fiduciary Standards