NCPA - National Center for Policy Analysis

States Explore Banding Together To Force Concessions From Drug Makers

March 23, 2001

Officials from half a dozen states are meeting today to discuss forming a multistate drug purchasing pool. The conference is the brainchild of West Virginia officials -- and representatives from Georgia, North Carolina, South Carolina, New Mexico and Washington are expected to attend. Ten states were originally invited.

  • The states hope to assemble more than one million state employees, retirees and their families under a single pharmaceutical-benefit manager and use the combined leverage to extract steep rebates from drug companies.
  • The companies contend pharmaceutical inflation has moderated sharply in recent years -- and that higher costs reflect greater drug utilization.
  • Last year, drug expenditures rose only 3.9 percent due to cost inflation -- but 10.8 percent due to increased utilization, especially of newer, more expensive drugs.
  • That is evident in figures from North Carolina, for example, where each beneficiary in the state-employee health plan got an average of 13.6 prescription refills last year -- up from 11.4 in 1999.

Some health experts predict the proposed state pool won't achieve more than "incremental" savings.

Source: Russell Gold, "Six States Discuss Pool to Curb High Drug Prices," Wall Street Journal, March 23, 2001.

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