Prescription drug costs and access have a substantial impact on state budgets and state decision-making.
One strategy attracting legislative attention is the idea of purchasing pharmaceuticals in bulk or joining a purchasing pool to increase negotiating power. By leveraging purchasing power across states or agencies, the goal is for all parties in the pool to receive lower prices. Currently, five operational multi-state bulk purchasing pools negotiate deeper discounts on behalf of state and local agencies.
Three purchasing pools are Medicaid-focused: the National Medicaid Pooling Initiative (NMPI), the Top Dollar Program (TOP$) and the Sovereign States Drug Consortium (SSDC). These pools generate savings using a preferred drug list or PDL. A PDL is a negotiated list of outpatient prescription drugs a payer authorizes to cover without restrictions as a way to encourage providers to prescribe certain drug over others. Drugs not included on the PDL may require prior authorization or a higher patient copayment. Please visit NCSL’s webpage, “Medicaid Prescription Drug Laws and Strategies,” for more information.
Two pooling initiatives exist for state and local governments but do not apply to Medicaid: (1) the Minnesota Multistate Contracting Alliance for Pharmacy (MMCAP) is a 50-state purchasing pool consisting of non-Medicaid state and local government agencies, and (2) the Northwest Prescription Drug Consortium (NPDC) is a prescription drug discount card program for residents of Oregon and Washington. The NPDC has an additional function in providing pharmacy benefit manager (PBM) services with the capacity to contract with other interested states.
According to program administrators, states using one of the Medicaid purchasing pools (NMPI, TOP$, or SSDC) typically save between 3-5%. However, amounts can vary based on several factors including whether the state negotiates their contract as a single purchaser, with a partner state, or enters into a multi-state agreement.
States use pharmacy and therapeutics (P&T) committees to determine coverage and preferred drug list, or PDL, placement. According to a Kaiser Family Foundation report, most state P&T committees review comparative effectiveness research to aid decision-making for coverage criteria.
One organization, the Drug Effectiveness Review Project (DERP) overseen by the Pacific Northwest Evidence-Based Practice, is a collaboration of state Medicaid agencies established to commission comparative effectiveness research to inform evidence-based decisions on state drug coverage.
Another group effort among state Medicaid programs is the Medicaid Evidence-based Decisions Project (MED), managed by the Center for Evidence-Based Policy (the Center). MED’s purpose is to support state Medicaid benefit design and coverage determinations by making scientific evidence available to decision-makers. The Center also directs the State Medicaid Alternative Reimbursement and Purchasing Test for High-cost Drugs (SMART-D), a group of advisors focused on helping states identify potential payment models for managing Medicaid prescription drug costs.
Multi-State Prescription Drug Purchasing Pools
The National Medicaid Pooling Initiative (NMPI)
Operational since 2003. At present, 10 states—Alaska, Kentucky, Michigan, Minnesota, Montana, New Hampshire, New York, North Carolina, Rhode Island and South Carolina—plus the District of Columbia participate. NMPI covers 3.8 million people and has supplemental rebate agreements with more than 90 pharmaceutical manufacturers.
The Top Dollar Program (TOP$)
Starting with two member states in 2005, there are now six participating states: Connecticut, Idaho, Louisiana, Maryland, Nebraska and Wisconsin.
The Sovereign States Drug Consortium (SSDC)
Founded as a non-profit structure in 2005, 13 states take part in the SSDC: Delaware, Iowa, Maine, Mississippi, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Utah, Vermont, West Virginia and Wyoming. Collectively, the consortium covers 10 million people.
The Northwest Prescription Drug Consortium (NPDC)
The NPDC is an intergovernmental agreement between Oregon and Washington which provides broad pharmacy management services, operating under a single pharmacy benefit manager (PBM), which generates additional savings by aligning purchasing through one vehicle and leveraging the purchasing power of Washington and Oregon. Entities from both the private and public sector are eligible to join. Notably, the NPDC requires 100% pass-through of all manufacturer rebates and prohibits spread pricing.
Additionally, it provides a discount card program to residents in those states. Discounts are applied point-of-sale at participating locations. According to the consortium’s website, the NPDC facilitates more than $800 million in annual drug purchases for over 1 million people in participating groups and facilities. Since 2016, the program generated over $99.4 million in additional savings.
The Minnesota Multistate Contracting Alliance for Pharmacy (MMCAP)
Founded in the mid-1990s, MMCAP is a group purchasing organization that combines the purchasing power of state agencies (such as public health departments), counties, cities and school districts in all 50 states to generate additional savings on pharmaceuticals and healthcare products. It does not include state Medicaid purchasing.
State Agency Drug Purchasing Pools
Instead of pooling resources with other states, some lawmakers are consolidating the purchasing clout within their own borders. Created in 2019, New Mexico’s Interagency Pharmaceutical Purchasing Council is tasked with identifying strategies to leverage the collective purchasing power of the state’s agencies—including corrections, state employees and retirees, counties, public schools and universities—and report their findings annually to the legislature. Legislators use the information to inform fiscal policy in the state.
California embarked on a similar path in 2019 and, by executive order, required state agencies—including Medi-Cal, the state Medicaid agency covering 12 million people—to implement a combined drug procurement strategy. Implementation is in initial stages and, according to the California Legislative Analyst office, the potential savings generated could be hundreds of millions of dollars.