Wisconsin Saves Money By Negotiating Prices
10 CommentsBy Ed Silverman // May 27th, 2008 // 7:16 am
Wisconsin is on track to save a projected $63 million over 17 months, following changes in the way it buys prescription drugs for people in state health programs, The Milwaukee Journal-Sentinel reports.
The changes, which took effect this year, enable the state to buy meds indirectly through a purchasing coop that includes several states that negotiate prices with drugmakers. Previously, the state paid HMOs a set amount each month to cover the cost.
“We thought it was definitely a good way to balance the state budget,” Jason Helgerson, who oversees Medicaid and other state health programs, tells the paper. “And so far, so good.”
Previously, each HMO had its own list of preferred drugs, but now there is one list for all their patients in the HMOs that contract with the state. This also means patients may not have to change scrips if they enroll in a different HMO. Docs can still prescribe drugs in the non-preferred category, but must get prior approval, creating an incentive to prescribe less costly meds on the preferred lists.
PhRMA opposes states carving out drugs from HMOs that contract with the state, believing HMOs should be responsible for all aspects of a patient’s care, Marjorie Powell, PhRMA’s senior assistant general counsel, tells the paper. PhRMA also contends preferred drug lists can cost states money when people require multiple doctor visits, or more costly care because a prescribed drug didn’t work.
madpharm
Wisconsin HMOs receive daily feeds of drugs paid by Wisconsin Medicaid if they really need drug information to monitor therapy. HMOs traditionally get 4-10% rebates - Wisconsin Medicaid gets rebates of nearly 40%. Funny big PHARMA isn’t concerned with changes in formulary drugs with each change in an HMO. IF you want to see real taxpayer savings, compare the Wisconsin Seniorcare with Medicare Part D plans. No rebates at all with Part D. Thanks Congress.
Sam
Congress and the next President should take a lesson from Wisconsin Medicaid
and use that model for Plan D. Contract bidding for the lowest price will do
much to reduce healthcare cost. In fact eliminate the profit making insurance
prescription plans altogether and allow seniors to pay one low cost premium
to the States.
Healthcare should be an entitlement for all US citizens
Atlex
madpharm and Sam.
I’m not sure you understand how WI Medicaid “negotiated” these discounts. Pharma companies are mandated by OBRA ‘90 to provide a minimal rebate of 15.1%. In addition, the law calls for CPI and best price penalties. In today’s market, the mandated rebate probably accounts for a discount of 30% or so. The state has the ability to negotiate on top of that. The average negotiated supplemental rebate across all products is probably under 10%. In Part D, the plans have successfully gained rebates of at least that much according to CMS.
If your arguement is that Medicaid-style negotiation is superior to PMB or health plan negotiation, there’s no data to support this, particularly when you consider the vast differences in the population in the two programs (Medicaid patients are mostly children and young women, while Medicare patients are elderly and/or disabled). Medicaid programs have highly restrictive access to medication, while Medicare Part D plans have much broader access in order to meet the complex needs of seniors.
On the other hand, if your arguement is that government can mandate lower prices–you’re right. So why not set prices at a 20% discoun? Or at 30%? Why stop there…the government cab mandate a 100% discount! That doesn’t make the government a good negotiator.
Sam
Alex, my personal experience on a group purchasing committee for 110
hospitals, we sent out bids to companies for the lowest price bid. The
company with the lowest bid won a yearly or multiyear contract. Believe it or
not, in some cases the low bid represented only 10% of the PHARMA company’s listed cost. This does not mean the government is mandating the cost - it is the company who determines what they can afford to sell the drug.
The Government’s own VA administration uses this same static to secure drugs at a very low price for its veterans.
No matter what the differences in population, Medicaid or Plan D, the over-priced drugs would be greatly reduced.
As a semi-retired pharmacist who works in a community pharmacy, I see the
frustration of patients and pharmacists who have to explain Plan D insurance
companies policies that the lay-public is not aware of. Why some of their
drugs are not covered; limitations to quantities; the need to notify physicians
that they must get prior authorizations from the ins. co. to okay payments;
various tiers of drugs that result in higher co-pays; and let us not forget the
donut gap that charges patients the full price of the drug.
Corporate insurance companies sit in their lofty offices, their slanted ads and
don’t have to hear the complaints and anger of their customers. Government
passes these policies based on the efforts of special interest lobbyists to ensure profits and they don’t hear the day to day complaints of the people.
You are right when you say the government is not a good negotiator - for its
citizens. It is a good negotiator for corporate American
Atlex
Sam,
I’m sorry but you clearly don’t understand the system if you try to use the VA as an example of negotiation. The VA has even more legislated advantages than Medicaid. In Medicaid, the rebate is at a minimum 15.1%. In the VA, it starts at 24%. Moreover, there are CPI and best price penalties as well. Also, the VA has an extremely restrictive formulary that is administered inside a closed system of care. If a drug isn’t covered, the physician doesn’t even offer it as an alternative for a patient.
As for your hospital system example, I don’t believe it applies for most branded chronic use products that still have exclusivity. Few of these products are offered through GPOs. And, when they are, it’s usually for a strategic reason. The pharma company knows that if a hospitalized patient is switched to or starts on a drug, they will usually continue on that drug upon existing the hospital. Essentially, this is the closest thing to sampling inside a hospital. Morever, an extreme discount (90%) that you mention is also unlikely for products with remaining exclusivity since it would subject the product to extreme “best price” rebate penalties.
Atlex
Sam
Alex said,”Morever, an extreme discount (90%) that you mention is also unlikely for products with remaining exclusivity since it would subject the product to extreme “best price” rebate penalties. It was my actual experience that brand patent protected drugs were part of the bidding process. Yes, I do understand that a patient put on these brand drugs will most likely continue when they are discharged from the hospital. I was
trying to show that the so-called established percent discounts were not
as low as they could be - 40% should be the starting point.
When you say I don’t understand the for discount Medicaid system.
I suggest that a new paradigm is required to break this highly profitable
PHARMA strangle hold supported by their lobbyists. You talk about
established regulations that benefit PHARMA and insurance companies. I
am more concerned with medication needs of seniors who range in age from
65 years old to into their 90s. They understand Social Security checks and
money taken out for healthcare. They understand a single system and cap
insurance. They don’t understand Plan D as I described in my first letter.
The “system” you talk about does not meet the needs of the people.
Yes, I do understand that a patient put on these brand drugs will most likely
continue when they are discharged from the hospital.
Atlex
Sam, let me see if I have this straight…you believe that every pharma company should essentially sell product to Medicare recipients for next to nothing. Of course, in your system, if pharmaceutical products are given to everyone, how do you want to handle the other 90% of the healthcare dollar? Seniors find doctors and hospitals expensive. Should we make them give away their services?
If you want to move in that direction fine, but essentially you’ll be nationalizing healthcare–and not just services. The government would have to take over the pharmaceutical industry, as well.
By the way, if they don’t understand Part D, why is it so popular? It has an 80%+ approval rating. Yes, it can be complex, but seniors recognize that it’s a far better deal thanb they were getting before and there’s plenty of choice that allows seniors to move to plans where their driugs are covered.
Sam
I did not indicate all drugs should be discounted by 90%. I did say by he
lowest bidder.
As far as Part D goes, it is the only game in town. Even my patients who have
Plan D dislike it intensely.
Atlex
Sam,
Unless the government is willing to restrict access to products, competitive bidding will not reduce costs according to the CBO. The VA is willing to restrict access significantly–a very high percentage of branded drugs are all but unattainable at the VA. Is that something you want to subject seniors to? If your “patients” are among the minority who dislike Part D, imagine how they’ll feel about a drug program run by the government where they can’t get products that their doctors prescribe.
Atlex
Sam
Atlex, for every medical condition there are an average of 6 different brands of different drugs for the same condition. Again, a new paradigm must be in
place in order for all drugs of any importance would be available. And my
patients are not the minority, they are the tip of the iceberg. I am sure we
could discuss this issue for many days and not convince each other as to who
is right. But I will leave you with this - in meetings where I am in contact with many other pharmacists, the main complaint I hear is that their patients are angry and frustrated by the hard time they have in getting the drugs that were prescribed for them because Plan D insurance will not approve the drug, or the quantity or the length of time they can get the drug. Some class of drugs are not even covered by Plan D. They can get the antibiotic, but cannot get the cough medicine. You can quote various agency for your data, but I get my information from the users of Plan D.