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The Director of Pharmacy Services for the Georgia Department of Community Health, Lori Garner, described the development and the implementation of the consolidated drug-purchasing program in Georgia. Combining Medicaid fee-for-service, the public employees and the university teachers, the number of enrollees in the state drug program is 1.2 million.

UPDATE:

As of August 2001, the Georgia/Express Scripts buying arrangement had been in operation for two months. Medicaid drug purchases are excluded from the Express Scripts calculation because the state kept their Medicaid rebates. The "retail" side of the drugs, used for non-Medicaid clients, are discounted through Express Scripts. They have yet to receive a rebate check, but they are currently processing claims. Georgia is considering adding other groups to the purchasing program, but they will have to look at options very carefully so not to jeopardize the whole program. Some plan information, like the preferred drug list, is available online at GA Dept. of Community Health and www.express-scripts.com . Another useful link for plan information is www.drugdigest.org.

Express Scripts is the pharmacy benefits manager for the program. There is a single preferred drug list across all three drug programs which is similar to Washington State's proposal to create a statewide drug formulary. Express Script's Pharmacy and Therapeutics Committee decides the drug formulary and list of preferred drugs. Georgia has a very active DUR board that endorses the drug formulary recommendations of Express Script and has developed additional drug use reviews to augment the cost-savings of formulary management. The DUR Board is looking at the utilization of senior drugs of concerns, narcotic analgesics, and nursing home pharmacy costs for potential areas to capture drug savings. A new physician-profiling program has been implemented and Georgia is sending out non-threatening prescriber letters when they find "inappropriate" drug use.

Despite all the efforts, the Georgia Governor will most likely not get the 100 million dollars he hoped to save in the drug program by running the benefit like private insurers (with a PBM). In fact, it is expected that the program will grow by that amount, with factors like increased drug utilization, fueling the increase. The Director is hopeful that new disease management programs for asthma, diabetes and hypertension will save money in other health care services.(1)

A 44-page report compiled by the Heinz Family Philanthropies in September 2001 (2) provided these further observations about Georgia:

"Through aggregation of the State of Georgia's programs, a portion of the overall program savings can be attributed to the negotiation of a more competitive financial arrangement with one plan administrator ---- in this case, a PBM selected through a competitive bidding process. Even with aggregate purchasing, it is important to underscore that the majority of the state's savings will be generated from changes in plan design, implementation of an expanded maximum allowable cost (MAC) price list for many generic medications, and the ability to implement consistent preferred drug list and benefit design strategies among a large number of Georgia residents. These savings, however, could also be implemented without aggregation.

As a result of many of these changes, Georgia has realized a reduction in pharmacy cost trends for the Medicaid program of 18% to 25% during the first six months of the new program. Below is a discussion of the various savings opportunities specifically implemented in Georgia that mirror many of the strategies used by employers to manage the increased cost of prescription drug programs.

Plan Design - Georgia anticipates the generation of a high level of savings with the implementation of a new plan design for the State Employees and the Board of Regents. The new plan design will incorporate movement to a three-tier preferred drug list. It will also require a higher level of participant cost sharing for non-preferred medications than was required in the old plan design. Additionally, in July 2001, the State of Georgia Medicaid program became the first Medicaid program to implement a three-tier plan design based on the common preferred drug list developed for the three State programs.

Maximum Allowable Cost (MAC) - The State Medicaid program implemented a more comprehensive MAC list as a basis for the pricing of generic medications. The Georgia MAC list was expanded from 186 to 857 drug products, allowing for more competitive discounts on many generic products than does the federal upper limit pricing, or the state-developed MAC pricing that is in place for many state Medicaid programs today. Georgia projects annual savings of $13 million as a result of its more competitive pricing of generic medications.

Customized Preferred Drug List - The Georgia Medicaid Drug Utilization Review Board coordinated with the PBM to create a customized preferred drug list. The preferred drug list was developed by using the PBM's national formulary as a base, and customizing a list of drugs that specifically meet the needs of the diverse population served by the aggregate purchasing group. Additionally, where appropriate, pharmacy management strategies have been aligned among the programs. Through the application of consistent management strategies and physician education efforts, Georgia anticipates savings from physician prescribing patterns that are consistent with the preferred drug list and benefit design for all programs.

Program Oversight - The State of Georgia created a new agency ----the Department of Community Health---- to provide administration, oversight, and leadership for all state-funded pharmacy programs. The creation of this entity has, and will, contribute greatly to the success of the program. Additionally, much of the success realized by the Georgia program thus far can be attributed to the political commitment and support by the state legislature and the Governor. Such support is critical to overall program success.

In summary, the Georgia representative acknowledged that, with the exception of the negotiated financial arrangement for the commercial programs and the indirect savings associated with application of consistent pharmacy management strategies across all programs, the majority of the cost savings realized will be the direct result of program changes that could have been implemented absent an aggregate purchasing arrangement. They did mention, however, that the benefits associated with the decision to make many of these program changes were maximized due to increased market concentration, and the ability to influence change for a critical mass of participants."

Updated 10/4/01

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