Pennsylvania Gov. Rendell says state could save $95 million annually by purchasing Medicaid drugs

Jun 25 2008

Pennsylvania Gov. Ed Rendell (D) says the state could save $95 million annually under a plan to centralize Medicaid prescription drug purchasing within the state Department of Public Welfare, but state Republicans say those savings would be offset by hidden expenses in the plan, the Philadelphia Inquirer reports.

Pennsylvania already spends $400 million to purchase drugs for Medicaid beneficiaries in rural areas. Rendell's administration wants to expand the purchases to urban regions of the state where Medicaid beneficiaries are covered by managed care plans. Drug costs for beneficiaries in urban areas are $800 million annually.

Donna Cooper, Rendell's policy director, said that because of the state government's purchasing power, it "can get a 30% rebate on the cost of the pharmacy, and the managed care companies cannot." According to the Inquirer, an actuarial study commissioned by the administration found that the state could receive a $20.36 rebate per prescription, compared with the rebates HMOs receive of $2.93 per prescription. Cooper said, "Our own experience and that of other states gives us good reason to believe that we are going to get the savings."

Opponents of the plan say that it would not reduce costs and would compromise beneficiaries' care. Steve MacNett, general counsel for the state Senate Republicans, said, "The vast majority of our members believe that the health care system would be better served by not doing the carve-out," adding, "There will certainly be huge, unquantifiable costs." Republicans have introduced legislation to prevent the Public Welfare Department from taking over drug purchasing from HMOs.

Sherry Knowlton, general manager for Keystone Mercy and AmeriHealth Mercy, said, "We are concerned that they may have seriously underestimated what they are taking on," adding, "As a result, our members' health may be compromised and all these people who are stabilized on their existing medication regimen could end up in the hospital emergency rooms" (Goldstein, Philadelphia Inquirer, 6/21).