State Laws that Help the Elderly with Prescription Drugs Costs

For more on this topic please also see our article- "State Health Care Laws and Proposals"

(2/8/10)- Legislators in at least 11 states have introduced bills this year aimed at improving access to health care, said a spokesman for the National Conference of State Legislatures. Both California and Missouri have had at least one of their houses pass legislation to create government backed health-care coverage for their residents.

"The ball's back in our court," said Melvin Neufeld, a Republican legislator in Kansas who is vice-president of the state legislature conference.

The American Medical Association plans to unveil a "code of conduct" as a model for its state affiliates to use in pushing for new regulations on the health-care issues.

(10/2/08)- Governor Arnold Schwarzenegger, signed the California budget bill which was a record breaking 85 days late. State Controller John Chiang moved quickly to pay about 80,000 claims that have gone unpaid since the state began its fiscal year on July 1.

The $143 billion spending plan, which the governor signed without the usual public ceremony is $68 million larger than last year's, sets $1.7 billion in reserves should the state revenues come in below estimate, which seems more than likely in light of today's economic environment in this country.

The dispute between the state's legislators and the governor was particularly bitter at times since California is faced with about a $15 billion deficit. Because of the monetary problem there is no hope for the state to enact a compulsory health insurance plan for its residents.

Please keep in mind however that there are two proposals that voters in the state will be voting on when they go to the polls in November involving the cost of prescription drugs for lower income individuals. As we noted in our item dated 8/16/08:

(8/16/05)- Californians will be asked to vote on two proposals at the ballot box this November, both of which are aimed at lowering the cost of prescription drugs for millions of the state's residents. These proposals are just a part of the special election called for by Gov. Arnold Schwrznegger so voters can consider his measures to change the way the state budget is balanced, legislative districts are drawn and public school teachers are granted tenure.

Union and consumer groups favor Proposition 79 which would offer discounts to people without health insurance who made less than four times the federal poverty level, or an annual income of $38,280 for an individual or $77,400 for a family of four. Some people with health insurance but heavy medical expenses would also qualify. As many as 10 million residents of the state may qualify under this proposal.

The drug industry's plan is called Proposition 78. It would offer discounts to those without health insurance making up to three times the federal poverty level, or $28,710 for an individual and $58,050 for a family of four. As many as 5 million residents of the state might qualify under this plan.

If voters in the state pass both plans, the one with the greater vote would prevail. Under Proposition 79, if a pharmaceutical company did not offer what state negotiators considered sufficient discounts the state could discourage use of that company's drugs in the state's Medicaid program, which spends about $4 billion a year on drugs.

Under Proposition 79 doctors who want to prescribe a restricted drug to a Medicaid patient would have to get permission, although there would be exceptions made if there was no adequate substitute for the drug."

(8/18/08)- According to the National Conference of States Legislatures, 20 states reported budget deficits as of June 2008, and the situation is only expected to worsen. California still does not have its budget in place, even though its fiscal year began on July 1. The latest figures showed that the state is running about a $15 billion deficit.

On July 31 Governor Arnold Schwarzenegger signed an order temporarily cutting the pay of roughly 176,00 state workers to the federal minimum of $6.55, and ordered nearly 10,000 state workers to be laid off. Once the budget is in place, the missed pay differential for the state workers between what they should have earned and what they were to be paid would be reimbursed to them.

California State Controller John Chiang, has said he could not abide by the pay cut, since the state's payroll software is so antiquated that it can not be reconfigured to correctly input any massive new payroll numbers.

A record number of Californian homeowners were met with foreclosure notices last quarter. There were 121,341 mortgage defaults in the state, up 125% from the second quarter of 2007, according to DataQuick Information Systems. The state is one of only three states that require a two-thirds majority in the Legislature to pass a budget

California has already cut its Medicaid reimbursement rate by 10% and deferred payments to its vendors. With this as a background, the state will not be able to afford any state health insurance plan for the benefit of the residents of the state.

(7/31/08)- The recessionary economy sweeping the nation is expected to have adverse affects on already existing and any proposed state laws to help state residents with their prescription drug costs.

In a recent survey conducted by the National Conference of State Legislatures an expected $40 billion deficit will result in job cuts, as well as cutbacks in spending by most states. Sales tax collections will be lower, personal income-tax revenues will go down, property-tax revenue will go down, and corporate income-tax will also mean lowered revenues coming into the state's treasuries.

"We expect it to get worse before it gets better," said Corina Eckl, fiscal-program director of the organization. The conference's new report describes the shortfall states face in their budgeting process for the current fiscal year, which began in July. It would come as no surprise, if this expected $40 billion deficit turns out to be a much larger one as the year progresses.

(10/11/05)-Louis Ling, general counsel for the Nevada State Board of Pharmacy, announced that the state's program that would allow its residents to purchase prescription drugs directly from Canada had been delayed until the state's attorney general issued an opinion as to the legality of the law. Nevada's attorney general is expected to announce his opinion by the end of the month.

The state's legislature passed and Governor Kenny Guinn signed the legislation allowing residents of Nevada to purchase drugs directly from Canada earlier this year.

(8/16/05)- Californians will be asked to vote on two proposals at the ballot box this November, both of which are aimed at lowering the cost of prescription drugs for millions of the state's residents. These proposals are just a part of the special election called for by Gov. Arnold Schwrznegger so voters can consider his measures to change the way the state budget is balanced, legislative districts are drawn and public school teachers are granted tenure.

Union and consumer groups favor Proposition 79 which would offer discounts to people without health insurance who made less than four times the federal poverty level, or an annual income of $38,280 for an individual or $77,400 for a family of four. Some people with health insurance but heavy medical expenses would also qualify. As many as 10 million residents of the state may qualify under this proposal.

The drug industry's plan is called Proposition 78. It would offer discounts to those without health insurance making up to three times the federal poverty level, or $28,710 for an individual and $58,050 for a family of four. As many as 5 million residents of the state might qualify under this plan.

If voters in the state pass both plans, the one with the greater vote would prevail. Under Proposition 79, if a pharmaceutical company did not offer what state negotiators considered sufficient discounts the state could discourage use of that company's drugs in the state's Medicaid program, which spends about $4 billion a year on drugs.

Under Proposition 79 doctors who want to prescribe a restricted drug to a Medicaid patient would have to get permission, although there would be exceptions made if there was no adequate substitute for the drug.

(7/27/05)- The 5 states that have banded together to form the I-SaveRx prescription drug program announced plans to add Australia and New Zealand in addition to Canada, Britain and Ireland as sources from which their residents will be able to buy lower cost drugs. The five states participating in the program are Illinois and Wisconsin the founders of the program and Kansas, Missouri and Vermont who joined it later.

Abby Ottenhoff, a spokeswoman for Governor Rod R. Blagojevich of Illinois stated that the program worked only with licensed pharmacies in the exporting countries, and that those pharmacies must comply with Illinois standards. They can not dispense drugs that do not originate in one of these countries. According to officials from Mr. Blagojevich's office, the average prices for 78 common prescription drugs were 51% cheaper in Australia and 32% cheaper in Canada than the U.S. The I-SaveRx program began in October 2004, and has been used to place more than 10,000 prescription drug orders.

(7/15/05)- If you are looking for information about what a particular state is doing to help the elderly with prescription drug costs please go to the site set up by the National Conference of State Legislatures located at We want to thank our viewer Christopher Uptergrove for pointing out this site to us.

(4/29/04)-Vermont and Michigan had already teamed up to form the nation's first multistate Medicaid prescription drug purchasing program on behalf of low-income residents. Dr. Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services announced that Alaska, New Hampshire and Nevada would be allowed to join in this pool for the purpose of purchasing prescription drugs for their Medicaid residents also.

First Health Services, of Glen Allen Va., is the prescription benefits manager that will represent the states in their negotiations with the drug manufacturers. According to Scott Alloco, a spokesman for First Health, the program has already negotiated over $10 million in rebates from the drug companies.

CMS officials would not comment further on the matter other than to say that they would make sure that all federal-purchasing rules were being adhered to. Michigan officials said that they had run into multiple hurdles in gaining approval for the program that they had formed with Vermont. Medicaid is funded by both the federal and state governments, so any changes to the program must be presented for approval to the CMS. There are approximately 900,000 Medicaid recipients in the five affected states, and a total of about 50 million low-income people in the program in the U.S.

"This is the first time n the history of the Medicaid program that states have been able to work together like this to negotiate lower drug costs, " said Dr. McClellan. The National Conference of State Legislatures says that there are at least 10 states that are making bulk-purchasing arrangements for Medicaid recipients. Another 10 states are looking to make similar arrangements for state employees, state retirees and their families. In addition to these individuals these same states would like to extend the buying program to its prison inmates and residents of state mental institutions.

With many of the state governments being faced with growing budget deficits this pooling can result in a huge savings for their Medicaid programs. The five states would be able to band together as a multi-state drug-buying group but each individual state would have its own list of preferred drugs. This formulary approach to buying prescription drugs seems to be the wave of the future for the states and even possibly for the federal government as well.

The states are only allowed to have this type of purchasing contract with a prescription benefits manager for a 6-month period of time or less under present federal regulations. This formulary approach would enable the states to join in the program that was announced earlier in 2003 by the states of Michigan, Vermont and South Carolina. These three states had separately contracted with First Health Services Corp., which is a unit of First Health Group Corp. of Downer's Grove, Ill., on its own list of preferred drugs.

New York, Texas, Ohio, Wisconsin and Iowa have been in discussions with Michigan to join the group and become part of the program. According to Geralyn Lasher, a spokeswoman for the Michigan Department of Community Health the three initial states in the group hope to start the program later this year. Even though each state will have its own list of preferred drugs there will be many drugs on the list that will be similar to some drugs on another states list.

CMS officials have stated that if a state wants to join with Michigan, Vermont and South Carolina a state must get prior approval from the federal government to use its list of preferred drugs. Mr. Scully said CMS would decide on a case-by-case bases whether to allow states to take advantage of other states' contracts. Both Michigan and Vermont have already established their own formulary drug list while South Carolina is in the process of setting up its list.

The U.S.Court of Appeals for the District of Columbia Circuit has upheld the Michigan "preferred drug lists" as a legal way for the state to control soaring prescription drug costs. The National Conference of State Legislatures says that 26 states are using such lists, and that 10 others have enacted laws authorizing their use. PhRMA has appealed the decision of the Michigan Court of Appeals.

Michigan's formulary approach had established a list of preferred drugs that is identified as the most effective products in each of 40 therapeutic classes. The least expensive are automatically covered under Medicaid and two other health programs operated by the state. Other drugs can get on the list if manufacturers pay supplemental rebated to the state. If a prescribed drug is not on the list pharmacists must obtain approval for the state's pharmacy benefit manager, If a doctor certifies that a non-listed drug is essential for the patient, a process is set up so that the named drug would be covered by the state program.

In its decision the appellate court ruled: "The available data confirm that in practice, the prior authorization requirement has proved neither burdensome nor overly time-consuming." The opinion went on to further say that a state can " establish a Medicaid prior authorization program in order to secure rebates on drugs for non-Medicaid populations if a state demonstrates, through appropriate evidence, that the prior authorization program will further the goals and objectives of the Medicaid program." Judge Karen LeCraft Henderson wrote the unanimous three-judge opinion that included Judges Judith W. Rogers and Stephen F. Williams.

Judge Henderson went on to further state that by making prescription drugs available to people with incomes slightly above the ceiling for Medicaid, the state helps them stay healthy. As a result "more resources will be available for existing Medicaid beneficiaries."

The Michigan Court of Appeals had overturned the decision granting the temporary injunction preventing the state's formulary plan from going into effect. County Circuit Court Judge Lawrence M. Glazer had issued a preliminary injunction to PhRMA blocking the state's new "formulary" prescription pricing law from going into effect. Florida's "formulary" law, had been upheld by a federal judge in that state.

According to the Michigan's Department of Community Health the formulary plan is already saving the state about $800,000 a week. In Vermont, where a formulary approach was adopted on March 11, 2002 for the more than 120,000 residents enrolled in Medicaid, the state says the move has saved the state about 41.6 million already.

In originally granting the preliminary injunction in Michigan, Judge Glazer ruled that the unorthodox manner of implementing the Michigan law violated the state's constitution, thus making the legislation unconstitutional. His ruling looked at the fact that several legislators in the state had veto power over the legislation after it was enacted. One of the groups that joined with PhRMA in the action was the Mental Health Association of Michigan. The association argued that the legislation deprived mentally ill patients from access to certain medications.

The pharmaceutical industry's trade association, the Pharmaceutical Research and Manufacturing Association (PhRMA) had filed a suit attempting to block Michigan's proposed prescription drug cost saving plan from going into effect. In addition to this legal maneuver, six big drug companies refused to offer Michigan any price concessions. This is the fourth state wherein PhRMA is attempting to block any action by the state to try to establish a drug formulary plan. The suit was filed in Lansing, Michigan with PhRMA being the plaintiff, and the Michigan Department of Community Health being the defendant.

The proposed Michigan system requires the pharmaceutical companies to lower the prices for their medications being used by the state's residents who are on Medicaid or other health programs. The program is initially targeted at the states 350,000 Medicaid recipients who receive care in traditional fee-for-service programs, and 200,000 or so patients in other state programs. The state hopes to save $42 million under its new system, and eventually hopes to cover the states 1.6 million residents under the plan.

Under the Michigan program a medical panel consisting of 11 doctors and pharmacists select a minimum of two drugs from each of 40 therapeutic categories as "best in class" based on medical evidence that will comprise the Michigan formulary. Doctors will be free to select any of the "best" drugs in its category regardless of price.

If a doctor chose to prescribe a drug to a patient that was not in the "best in class" category, the physician would be required to get several authorizations from state officials before Medicaid would pay for the drug. If a drug was not in the "best" list it would be considered a restricted drug. Incidentally neither of the arthritic pain relievers Celebrex or Vioxx made the list, with generic ibuprofen and generic naproxen making it as the "best" in the pain reliever category. Lovastatin, the generic version of Mevacor is the cholesterol lowering statin drug on the list, rather than Pfizer's Lipitor or Merck's Zocor.

If a pharmaceutical company did not want one of its drugs placed on the restricted list, it would have to cut its price to at least match the lowest price of the drug on the "best in class" list. The program was devised by the Michigan Department of Community Health. Michigan officials have rejected the type of preventative programs that Florida agreed to with Pfizer Inc. and Bristol-Myers Squibb, which we describe later on in this article.  

According to Republican Governor George Pataki of New York, a preferred drug formulary program could save the state about $1.2 billion in Medicaid costs, and also could save the state's Elderly Pharmaceutical Insurance Coverage (EPIC) program about $38 million in the coming fiscal year. Because the state is experiencing serious budget shortfalls, this would be the only way to prevent extremely serious cutbacks from occurring.

The programs would cover only medicines that have been deemed clinically effective and less costly by outside medical experts. A physician could still prescribe a drug not on the approved list but the patient would need to get prior approval for the drug to be covered under either of the programs. The state is seeking a pharmacy management contractor to start the program later this year.

If you are looking for information about what a particular state is doing to help the elderly with prescription drug costs please go to the site set up by the National Conference of State Legislatures located at We want to thank our viewer Christopher Uptergrove for pointing out this site to us.  

According to the National Conference of State Legislatures, a Denver-based advocacy and research group, at least 33 states have passed legislation establishing some type of prescription drug assistance program for residents who meet age or income requirements. Because of budgetary constraints there have been several attempts to cut back on these programs.

For the first time all 56 state and territorial AIDS drug-assistance programs have joined forces to extract price concessions from the drug manufacturers to help them lower their costs for AIDS drugs. The AIDS drug-assistance programs are state-run buy largely federally funded efforts to provide drugs to low income people who lack insurance.

The consortium of state and territorial programs is known as the National Alliance of State and Territorial AIDS Directory. Included in the drug manufacturers who reached the agreement with the consortium is Pfizer Inc., GlaxoSmithKline PLC, Merck & Co., Abbott Laboratories, Roche Holdings AG, Boehringer Ingelheim GmbH, Gilead Sciences Inc. and Bristol-Myers Squibb. State officials met with the companies individually in order to avoid antitrust issues that might have arisen in connection with the final agreement. Experts estimate that the consortium will save about $65 million through the agreement next year.

The AIDS drug assistance programs are state-run but largely funded by the federal government. The programs need an additional $282 million and cover about 84,000 patients, or one-third of the U.S. market for AIDS drugs, at a total cost of about $850 million per year. It is estimated that the programs will need an additional $282 million in funding for the 2004 fiscal year to prevent waiting lists from growing or adding more restrictions.

Do you need help in determining whether or not an elderly relative, or the family of an elderly relative is eligible for any of the more than 1,000 state or federal assistance program? The National Council on Aging, a nonprofit research and education organization based in Washington, D.C. launched a site at to help people over 55 find out what is available to them and their families. It is estimated that there are about 26 million U.S. households that are caring for an older relative or friend. If you do not have access to a computer you can call your local agency on aging to find a center that offers the service. There is a toll free number, 1-866-583-1234 called Digital Divide Networks that lists public places where you can get access to a computer on line.

It is estimated that there are approximately five million older Americans who qualify for any number of perks who are not getting them. The new site that has been set up will include programs such as Supplemental Security Income, Medicaid, state drug-benefits, Meals-on- Wheels, food stamps, health-insurance counseling, veterans' medical care and transportation. It will offer the addresses and phone numbers of local government offices. It will also offer such diverse information as to how to get a $10 lifetime pass to national parks, property-tax exemptions, utility-bill relief, and home repair and renovation services and many other items of information in getting needed assistance for the elderly.

The Coalition for Affordable Drugs is attempting to have a proposal put on the Ohio ballot that would enable the state to negotiate with the drug companies so that the state's 2.2 million uninsured residents could buy their prescription drugs in bulk. The proposal is modeled along the lines of Maine's prescription drug plan called MaineRX the legality of which is now pending before the U.S. Supreme Court. A decision on the Maine program is expected from the Supreme Court sometime in May. PhRMA is attempting to prevent the proposal from appearing on the ballot by throwing as many legal obstacles in the path of the proposal as it possibly can. At the same time PhRMA has been negotiating with Gov. Robert Taft the Republican governor of Ohio in connection with his proposed drug discount card name "Golden Buckeye". Governor Taft has publicly blasted PhRMA for foot dragging the negotiating process with his administration.

To start the process in Ohio all that is required is the signature of 100 of the state's residents. If this step is approved by the state's attorney general, petitioners for any proposal must then gather enough legal signatures of registered voters, both statewide and in half of Ohio's 88 counties. The state's legislature then has four months to act on the proposal. If the legislature fails to act on the proposal (or even if the legislature rejects the proposal) within that period of time, the petitioners can gather new signatures to put the issue before the voters on the next general-election ballot.

The coalition had gathered more than 143,000 signatures statewide by December, and this was more than enough to satisfy the requirement under the law of 97,000 citizens from Ohio. The legal requirement was also met in 44 of the state's counties. PhRMA filed protests in 41 counties, most under the name of Keith Brooks, who is the chief lobbyist in the state for the organization. Individuals and not organizations must file objections to petitions in the state.

One of the many objections that PhRMA has interposed is that many of those who circulated the petitions misstated their compensation. The organization alleges that the circulators of the petition did not state whether they were paid $1-$1.25 without specifying per hour or per signature. Another objection that they interposed was that the circulators gave false addresses for their employer, writing the temporary Red Roof Inn location instead of the out-of-state residence where the circulator came from. Organized labor organizations paid for most of the expenses in the petition drive. The petitioner's attorney, Donald McTigue is also arguing that the information requirement under the Ohio law violates the First Amendment of the U.S. Constitution.

The coalition presented Ohio's attorney general with the initial petition signed by 100 of the state's residents as required under the state law in September 2002. PhRMA objected to this initial petition with as much nit picking of the petition as possible, but this petition was approved thus allowing the coalition to proceed to try and get the required signatures for step two of the process

All states with the exception of Vermont are required by their respective laws to have balanced budgets. All 41 states with income taxes except for Michigan had lower than projected personal income-tax collections for the pivotal month of April. Economic experts have predicted that there will be an $85 billion deficit collectively for the states in fiscal year 2004, on top of the estimated $25 billion that they face for fiscal 2003.

The recently passed federal tax relief legislation calls for the federal government to allocate $20 billion in relief to the state governments which will be spread out over a 2 year period of time. Of the $20 billion package, $10 billion would go to the states in the form of higher federal payments for the Medicaid health-insurance program including nursing home payments. The other $10 billion would be in grants to states to cover a wide range of purposes. New York State stands to receive at least $2 billion in aid from the package.

Because 37 states use the federal definition of taxable income, they stand to lose quite a bit of revenue since only 15% of dividend income and capital gains will be taxable by the federal government. With the economy still struggling along this means that there will be more cuts coming from programs established by the states to help defray the cost to their residents for prescription drug costs. In addition to the cutbacks that will be occurring in these programs, most state and local income taxes will be going up, as well as property taxes on the local level. Fees will be rising also for many of the services provided by governmental agencies.

There are presently 26 Republican state governors and 24 Democratic state governors. Although the vast majority of the governors favor some form or other of federal help, they have not actively pursued the matter with the president. When the National Governors Association met in February 2003, the organization failed to take a strong stand on the matter. More than half the states have already resorted to tax increases in an attempt to close their budget deficits.

In New York State the legislature swiftly overrode the 119 vetoes to the state's budget (2003)that Governor George Pataki had instituted. According to the legislative leaders, the Pataki administration had cut aid to education and funds for Medicaid too drastically in the budget submitted by the governor.

In many instances several state and municipalities to give the impression that they are not increasing taxes have instituted fees and surcharges. Many other states have raised taxes on cigarettes and sales taxes. With the deficits growing and the economy sluggish at best the likelihood of prescription drug coverage under Medicare grows remoter every day.

California has become the first state to take steps towards regulating the business practices of hospital group purchasing organizations such as Premier and Novation. In a vote taken by the state's Senate Judiciary Committee, a bill was passed that would require them to comply with a code of conduct. The bill would require the buying groups to disclose whatever payments they receive from medical supply companies. Any fees that they receive from companies that they deal with would have to be revealed to the hospitals that form the membership group.

A federal audit of Premier, conducted by the inspector general of the Department of Health and Human Services, found that the buying group had often failed to disclose these fees. "Our review found that 37 of the 107 responding members in our sample did not receive an advance agreement indicating that Premier would receive an administrative fee from vendors based on the member's volume of purchases".

New York State and six other states have filed suit against Pharmacia (which has merged into Pfizer) and GlaxoSmithKline Plc. The drugs involved in the lawsuit are Pharmacia's Camptosar (Cancer) and Glaxo's Kytril (Anti-nausea). One of the key issues involved in the suit revolve around the "average wholesale price" (AWP), which keeps on popping up in many of these pricing matters. Normally, Medicare does not reimburse for prescription drugs, but if the drug is administered in the doctor's office, Medicare will reimburse for it. Please keep in mind that the patient is still responsible for the 20% co-pay.

The New York suit alleges that the two drug makers have committed consumer fraud, and also have made false statements to governmental health plans. The suits also allege that the drug companies committed commercial bribery by undercharging the doctors for the drugs that the sold to them, thus inducing the doctors to use their drug instead of the drug of a competitor.

Hawaii and the District of Columbia have joined with eight northeastern states, including New York and Pennsylvania to join together to form a coalition to form a nonprofit operation to manage their prescription drug plan. The other states involved in the pooling plan are Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont. The initial coverage of this consortium is aimed at the state and local employees and Medicaid recipients.

According to Health Management Associates, a consulting firm, this group of states could save about $1.8 billion a year if they created their own joint pharmacy benefit manager. Of course the question then arises could government programs run more effectively than private companies in overseeing such a program? New York spent $2.4 billion on prescription drugs for more than 3 million Medicaid recipients in 2001. This was a 75% increase from what the state spent in 1998.

Peter E. Shumlin, former president of the Vermont Senate and former chairman of the Northeast Legislative Association on Prescription Drug Prices stated "The PBM. model has failed." He went on to further claim that "The PBM's often negotiate secret kickbacks that don't benefit the purchaser". Maine, New Hampshire and Vermont formed the country's first state coalition, the Tri-State Prescription Drug Purchasing Pool. Mr. Shumlin will be chairman of the National Legislative Association on Prescription Drug Prices, the group that is organizing the new benefit plan.

By managing their drug benefit programs themselves, the states intend to keep any drug company payments for themselves. At least three of the largest drug benefit managers (Medco Health Solutions, Advance PCS (which has merged into Caremark) and Express Scripts) have special deals with drug manufacturers that require them to create financial incentives for Medicaid recipients to use certain prescription drugs.

The organizers of the new non-profit plan would include coverage for mail-order prescriptions and for importing drugs from Canada. The Heinz Family Philanthropies, a charitable group, is paying for planning for the nine-state plan. Jeffrey Lewis, executive director of the foundation, said the states hoped to farm out most of the operations, like processing payment claims and selecting networks of pharmacies. The plan would develop its own list of preferred drugs thus adopting the formulary approach in dealing with which medications can be ordered under the plan. Physicians would have to apply for exceptions if they wanted a patient to have a medication that was not on the formulary list.

The members of the "Southern Coalition", West Virginia, Louisiana, Maryland, Mississippi, Missouri, New Mexico North Carolina, South Carolina and Washington have formed a Pharmacy Working Group comprised of representatives of the state's executive branches in order to pool their buying power to help reduce the cost of prescription drugs. In using the approach involving the executive branch of the state government, rather than the legislative branch, the hope is that more can be done without having politics enter into the matter. So far this group is aimed at covering the state and local employees and retirees only which would total about 1.5 million people. One of the first steps that the "Southern Coalition" is taking is doing a survey of each states' existing discounts, contracts with pharmaceutical-benefits managers and pooling all other information available in this area. The coalition also discussed ways to expand usage of generic drugs that are just as effective as more costly prescription brand name drugs.

This consortium of states is now considering bids from 7 pharmaceutical benefit managers. According to Tom Sussman, director of the West Virginia Public Employees Insurance Agency "Our spending on drugs is going up 20 percent a year." (Pharmaceutical Benefit Managers revenues) "are going up at the same rate." "The sicker we get, the healthier they get, because they are paid on a percentage basis." This of course brings up the point raised by many experts that PBMs are not the most effective way to truly bring down the cost of prescription drugs.

This group intends to go the route of having a pharmaceutical benefits manager (PBM) handle the prescription drug purchases and manage the claims processing of its members. PBMs make money by getting rebates from the drug companies because of the large amount of drugs purchased under the plan. In this case however, the states will seek to recover the entire rebate for the group but will pay the PBM a larger-than-usual administrative fee. The plan will also develop a common preferred-drug list for their employee health plans. The PBM will negotiate with the drug companies in connection with having the companies drugs included in the plan. State officials say that the combined group will cover 1.2 million members.

In a continuation of the recent trend towards consolidation to enhance states purchasing power with the drug companies, five western states are presently moving towards such an arrangement. The states involved in the discussions are Alaska, Idaho, Montana, Oregon and Washington. They are attempting to unite their public-employee health-insurance plans in order to be able to utilize their increased buying power to be able to obtain larger discounts from drug manufacturers. The discussions may lead to including their older residents in the group.

Utah became the first state to receive federal approval of their program to cut back somewhat on the benefits for its Medicaid beneficiaries, while at the same time extending health insurance coverage to others in the state with low income levels that were too high however for Medicaid minimum levels.

Utah has about 200,000 residents in the state that are uninsured. In order to be able to fund basic health insurance coverage for as many as 25,000 low-income residents, the state trimmed benefits for about 17,600 Medicaid beneficiaries. The new program for the low-income residents capped the out-of-pocket costs at $1,000, and included dental exams and cleaning under its coverage for them.

The program is called Primary Care Network, and participants pay an annual fee of $50. A small co-payment is also required for medical services and prescription drugs. In order to be eligible, residents must have incomes below 150% of the federal poverty level, or $13,290 for an individual. The state at the same time reduced benefits and raised costs for 12% of the people in the Medicaid program offered by the state. The change resulted in a savings of about $7 million for the state which also eliminated another state health program.

The new program leaves several gaping holes in medical coverage. It does not cover hospitalization, or care by specialists whereas Medicaid does cover these items. The program covers yearly eye exams but does not cover eyeglasses. Utah hospitals have also agreed to donate about $10 million in care to members of the new program.

The state of Oregon is in the forefront of trying to answer the question as to whether or not the more expensive brand name drug is better than the cheaper generic drug in the same category of treating certain conditions. The state has been publicizing its findings by holding open meetings and publicizing its findings on the Internet.

It has also enlisted groups such as AARP to spread the word as to its findings. The state has posted its findings on four classes of drugs, including statins and heartburn medications. Researchers at Oregon Health & Science University in Portland assemble the information. The state does not require its doctors to use only the medications on its formulary list, but hopes instead to educate their doctors to the facts that they have uncovered.

Blue Cross Blue Shield of Michigan has taken an aggressive approach in promoting generic drugs over brand name drugs as it hopes to reduce its members prescription drug costs while not lowering the quality of care for its members. The campaign is called "Generic Drugs: The Unadvertised Brand." Company officials expect that the program will cut statewide drug costs by at least $50 million per year. Most states have laws that allow pharmacists to give patients generic drugs instead of brand name drugs whenever available. In reality however most pharmacies do not make the substitution.

The July 13, 2002 edition of the New York Times had an article written by Robert Pear entitled " Pennsylvania Struggles to Repair Model Prescription Aid Program". To see what the Pennsylvania programs consist of please see our article below. The gist of the article deals with the fact that the legislature in Pennsylvania is seeking to make some changes in the state prescription drug aid plan because of the soaring costs incurred under the program. The pending changes are contained in a bill introduced by Senator Timothy F. Murphy, a Pittsburgh Republican.

The Pennsylvania chapter of AARP supports the senator's bill. The bill would set up a state formulary system, charge higher co-payments for drugs not on the list and encourage the usage of mail order pharmacies to obtain medication for chronic illnesses. It would set up limits for payments for generic drugs also. It also stipulates that the brand-name drug companies would stipulate that Pennsylvania residents would not pay more that the "best price" charged to any other customer in the U.S. The bill further stipulates that drug companies would have to pay rebates to the state to offset any price increases that exceed the rate of inflation. The governor of Pennsylvania, Mark Schweiker has indicated that he would support the bill.

Two states have applied for and been accepted in the President George W. Bush's administration's program that will provide federal matching funds to cover the cost of prescription drugs for elderly people whose incomes are higher than the minimums set for Medicaid coverage. Wisconsin and Illinois are the two states that have been accepted into the program, while Connecticut, Florida, New Jersey and South Carolina have applied for and are presently awaiting approval from the federal government. 18 other states, including New York either have either tentatively applied or expressed an interest in applying to the program. According to the latest figures, at least 34 states now have adopted their own drug subsidy programs for low-income people.

Under the new federal program, each participating state will be provided with a waiver from the Medicaid law for the next five years after the state joins the program. Under the waiver there will be a federal subsidy ceiling that will rise no higher for the five-year period of time, than the federal contribution for Medicaid to the state for the year before it joins the program.

Thus the state is locking in an upper limit on the amount of money it will receive from the federal Medicaid program. In order to be entitled to receive more money, the state will have to cut back in some other aspect of its Medicaid budget so that the new program will be "budget neutral". With Medicaid costs running at about 20% of the average state's budget and the costs for prescription drugs rising rapidly, this could be quite a dicey situation for the states that accept the program. Please keep in mind that the states and the federal government split the cost of Medicaid 50-50. In Wisconsin all participants will pay a $20 application fee.

The program will start in September in Wisconsin with the income limits being $21,265 for individuals and $28,657 for couples. These income levels are 240 % above poverty levels and it is estimated that about 176,400 residents of Wisconsin will be eligible under the program. Illinois has seen 147,000 people register for its program as of June 2002.

When H. Carl McCall was New York State Controller, and therefore in charge of investments for the state's pension fund, he sent a letter to ten of the largest pharmaceutical companies. In the letter he expressed concern with the high price of prescription drugs, and with the lack of action by the drug companies in holding down the rising costs of prescription drugs. With almost $112 billion in assets and almost 1 million members and retirees in the fund, it is one of the largest municipal pension funds in the country.

The state of Minnesota has instituted a lawsuit in a state court in Minnesota against Pharmacia Corp. alleging overcharging by the drug company causing the state and some of its citizens to overpay for some cancer-fighting drugs such as Adriamycin. The suit alleges that in the year 2000, Pharmacia reported an average wholesale price (AWP) of $241.35 per dose, while in fact it was selling the drug to some oncologists for as little as $33.43. Physicians generally administer Adriamycin during office visits, rather than the patients administering the medication to themselves at home. Once again we see that the AWP has become the center of another lawsuit, and sooner or later this system will have to be changed so that a fair and accurate price for a drug can truly be determined.

In creating such a large spread the state alleges that Pharmacia created an incentive for the doctors to choose Adrimycin rather than another chemotherapy drug. Thus the state overpaid for the drug in its Medicaid program. The state further alleges that its residents were also damaged by the overcharge. It remains to be seen if any of the physicians will be criminally charged and prosecuted in this matter.

According to Minnesota's Attorney General Mike Hatch, he has been in contact with other state prosecutors on these matters from California, Florida and Texas to "exchange information and strategize" on this and similar cases in the works. He also stated that similar lawsuits are being contemplated against some other pharmaceutical companies.

North Carolina is another state that has created a formulary list for its Medicaid beneficiaries as the states try to rein in their rising costs for prescription drugs. The state's Department of Health and Human Services said it would create a preferred-drug list for Medicaid patients, and thereby it expects to save about $15 million a year in drug costs. A panel of doctors will recommend the best drugs in each class, and the state will select the two cheapest in each class. If a doctor wishes to prescribe a drug for a Medicaid patient that is not on the list he will need the approval of the state's Medicaid officials.

The Wall Street Journal reported in an article in the May 21, 2002 edition that "35 states are working together in hopes of repeating the success of the nationwide campaigns that led to the $208 billion tobacco-industry settlement and the pursuit of antitrust sanctions against software giant Microsoft Corp.. Officials from the states have been exchanging tactics and took part in a conference call two weeks ago to organize a drug-pricing task force."

The article is entitled "States Go to Court in Bid to Rein in Price of Medicine" and was written by Andrew Caffrey, Scott Hensley and Russell Gold. The article discusses that fact that the states are acting because of their rising budget deficits and one the areas adding to this problem is the burgeoning cost of prescription drugs for Medicaid beneficiaries.

Time and time again we see that the issue of the Average Wholesale Price (AWP) which we discuss below is at the heart of the problem. We at therubins feel that it is time to find a more accurate measure of what a drug should actually cost the federal government rather than use the AWP system.

Montana and Nevada have brought a lawsuit against 17 drug manufacturers alleging overpayments based on inaccurate AWP drug costs. The states have retained the same law firm for their suit that won one of the suits against the tobacco industry. The state of Texas has also brought a lawsuit against three companies-Dey Inc., Roxane Laboratories Inc., a unit of Germany's Boehringer Ingelheim GmbH, and Warrick Pharmaceutical Corp. alleging that the 3 companies created financial incentives for pharmacists to choose their asthma inhalers over other companies.

Governor Gary Johnson of New Mexico signed a Medicaid drug overhaul bill modeled on the Florida formulary bill. Thus New Mexico joins California, Florida and Michigan in having a drug formulary bill for their Medicaid beneficiaries.

In Georgia, as of February 1, doctors must get prior approval before they can order certain expensive drugs for Medicaid and state employee health plans. PhRMA along with a group called Medicines Work Coalition, doctors and patient advocates to defeat this prior approval requirement.

A bill was defeated in the state of Washington that would have established a prescription drug formulary similar to what is in effect in Florida. The defeat of the bill was lead by an aggressive lobbying campaign in the state that was led by PhRMA. Ree Sailors, health-policy adviser to Gov. Gary Locke, said that the state had hoped to be able to save over $24 million a year by 2005 in the Medicaid program under the formulary.

According to a news report, PhRMA helped finance the effort by the Consumer Alliance, a consumer-advocacy group that claimed the bill would negatively impact the poor by restricting their ability to obtain certain drugs not on the formulary list. Incidentally a complaint was filed with the State Ethics Commission in Maryland, by the Maryland Citizens Health Initiative Education Fund Inc. alleging that PhRMA fronted a similar campaign in that state by Consumer Alliance. Don Rounds, president of Consumer Alliance denied the charge stating that it just happened that his organization and PhRMA were on the same side on this issue.

With many states now being faced by widening budgetary deficits, more than a dozen of them are considering reducing their reimbursement rates under Medicaid. There are approximately 36 million Americans who receive their health care coverage through Medicaid. On average Medicaid costs consume about 20 % of the average state budget. This in turn means lower payments to the pharmacies who are in turn thinking about cutting back on servicing of Medicaid beneficiaries. The states are caught in a vise themselves as a result of lowered revenues as a result of the recession and escalating medical and drug expenses.

The following states have made reductions, or are considering cutting back on their Medicaid spending: Ark., Col., Ct., Id., Ill., Ind., Md., Miss., Mont., Neb., N.C., Oh., Okla., S.C., Va., and Wash. Representatives of CVS and Walgreens said they might reduce hours, close stores and stop expansion plans in those states that make these cutbacks. Indiana pharmacists are challenging the cutback in reimbursement rates for Medicaid beneficiaries. 

A California state law requires that all pharmacies that participate in the state's Medicaid program must charge Medicare customers the same price as Medicaid beneficiaries pay for their prescriptions. The New England Journal of Medicine reported on the results of a study that found that about one-fourth of the pharmacies in the state failed to provide this discount.

About 500 pharmacies in the state were involved in the study, and only about 45% of them offered the discount without being asked about it as required by the law. Compliance was worse in low-income areas, according to the study that was designed and conducted by a unit of the Rand Corp., a public-policy research group.

The discount was given at the customer's demand at 91% of the chain stores, compared to only 58% at the independent pharmacies. The law fails to provide any means to monitor compliance, although technically violators could lose their ability to participate in the state's Medicaid program.

The U.S. Department of Health and Human Services (HHS) will allow the state of Illinois to apply extra federal Medicaid money, starting on June 1, 2002, to its already existing Circuit Breaker prescription drug program. That program is intended to assist low-income elderly residents with their prescription drug costs.

This additional funding will allow about 368,000 residents of the state to have the same prescription drug benefit coverage as residents of the state who are covered by Medicaid. Thus the program will afford coverage to individuals and families earning up to 200 percent of the federal poverty level (about $23, 000 for a family of two). HHS Secretary Tommy Thompson also announced a new streamlined application process called Pharmacy Plus for other states planning to take advantage of the federal Medicaid funding available to expand prescription drug coverage.

PhRMA sustained another loss in the state of Maine, when federal Judge Ricardo M. Urbina of the U.S. District Court in Washington ruled that federal health officials had the authority to grant the state a waiver to use the state's Medicaid program to help provide discounts to non-Medicaid recipients. We discuss Maine's discount prescription drug plan known as MaineRX in our article on Maine's Prescription Drug Plan . Incidentally Judge Urbina is the same judge who castigated and ruled against Bristol-Myers in the BuSpar patent extension case against Mylan and Barr Labs that we discuss in our article about Patent Laws and the Cost of Prescription Drugs.

While Medicare is covered entirely by the federal government, Medicaid is financed jointly by the federal government and the states. President Bush's newly proposed budget hopes to save about $9 billion over the next 5-years by reining in payments to public hospitals in at least 31 states, and by cracking down on state efforts to obtain extra federal money to finance health care for the poor.

Under Medicaid rules, states can pay public hospitals up to 150 % of what would be paid for the same services under Medicare. Under the proposed change this amount would be limited to 100 %. One of the reasons why the 150 % allowance arose in the first place was because the public hospitals deal with a much larger percentage of uninsured patients. Public hospitals have more specialized high cost units like trauma care and burn units.

The government is also demanding the return of some of the money that the states had collected by illegally imposing a tax to cover the state's share of Medicaid expenses. State officials claim that they could lose between one-fourth to one-half of the special payments they now receive for public hospitals. With most states now going into deficit from the previous surplus position that their budgets had been in, it would be particularly devastating to them at this time.

The Bush administration announced its program to help states provide drug coverage for low-income Medicare beneficiaries. Under the plan the federal government would pay 90% of the cost of expanding prescription-drug coverage to include Medicare beneficiaries whose incomes do not exceed 150 % of the poverty level (about $11,300 for a single individual and $17,000 for a family of two). States participating in the plan would have to pay the other 10% of the cost.

It is estimated that it will cost the federal government about $8 billion over two years to implement the plan, and it would cover about 3 million low-income Medicare beneficiaries. Congressional approval is needed before the plan can go into effect. The plan is part of the president's "President's Framework for Strengthening Medicare".

The attorney general for the state of Nevada, Frankie Sue Del Papa has filed suit against 12 of the major drug companies claiming that they use a pricing structure scheme that has cost the state and consumers many millions of dollars. We will fill you in with more data on the lawsuit as soon as the information becomes available to us. Montana State Attorney General Mike McGrath has also brought suit against 18 drug-makers and marketers accusing them of illegally inflating drug prices, which in turn cost the state and its residents millions of dollars in damages.

Prescription drug spending for Medicaid recipients in Indiana grew 20% last year to $549 million. Governor Frank L.O'Bannon (Dem.) is hoping to cut $251 million in state contributions to Medicaid over the next two years. In the first round of cuts last year state officials reduced payments to hospitals, nursing homes and pharmacies by 5%. State officials there have indicated that they hope shortly to be able to set up a "formulary plan" for prescription drugs.

The governor of Idaho, Dirk Kempthorne (Rep.) told the State Legislature: " Prescription drugs are quickly becoming our single largest Medicaid expense. Prescriptions are expected to cost almost 40% more this year than they did two years ago." He also is hoping to introduce some form of "formulary plan" for prescription drugs in that state also.

According to figures released by the Centers for Medicare and Medicaid Services health care spending rose in the U.S. to $1.3 trillion in 2000, up 6.9% over the spending in 1999. The really big increase took place in the spending for prescription drugs, which rose by 17.3% over the figure in 1999 to a total of $121.8 billion in 2000. Hospital spending rose by 5.1% to $412 billion in 2000.

Spending by the federal government for Medicare beneficiaries and the disabled rose by 5.6% to $224 billion, while federal and state spending for Medicaid rose by 8.3% to $224 billion. The spending for health care was the highest percentage increase since 1993 when it rose 7.4%. Health care spending averages $4,637 per person in 2000, compares with $4,375 in 1999. It is because of these large increases in spending by the states, that they are trying to find methods to rein in these costs, and at the same time not hurt the quality of medical care to its residents.

According to a June survey of state spending by the National Governors Association, Medicaid spending for prescription drugs among the group of states totaled $5.7 billion for the fiscal year 2000. With the realization becoming more and more apparent that the federal government, because of the growing amount of the federal deficit will be unable to help, the states will have to do something about the problem themselves. Thus the movement continues to grow wherein states are banding together to create an even greater buying consortium which hopefully will help them lower the costs of prescription drugs.

On December 28, 2001 the U.S. District Court for the Northern District of Florida (Tallahassee) ruled in favor of the State of Florida by upholding the states new formulary law. To be included in the state's formulary a drug company had to give an extra 10 % discount on top of the compulsory Medicaid 15.1 % discount in order to be included in the approved listing of drugs that did not need prior authorization.

PhRMA, the drug industry's lobbying arm thus has a loss in Maine and a victory in Vermont on the scoreboard, as it attempts to slow down the formulary approach to holding down prescription drug costs. About a dozen other states that could be in line for "formulary" type or preferred drug list (PDL) programs including Florida, Hawaii, Illinois, Oregon, Texas, Louisiana, North Carolina and Georgia.

The Pharmaceutical Research and Manufacturers of America, the drug industry's trade association, had filed the federal lawsuit against the state of Florida, seeking to block the new state law re prescription drug pricing (PhRMA vs. Meadows). The suit, filed in Tallahassee, Fla, contends that the Florida law broke a federal requirement that all prescriptions be available to Medicaid recipients, unless there is a finding that the drug offers no clinically meaningful benefit. PhRMA intends to appeal the Florida ruling to the Eleventh U.S. Circuit Court of Appeals in Atlanta.

Starting July 1, the State of Florida put into effect its formulary prescription drug program with a preliminary list of more than 1,300 prescription drugs that will receive preferential status under the state's Medicaid program. The state expects to save over $214 million under the program. To participate in the program drug makers had to agree to pay substantial but undisclosed discounts in the form of rebates to paticipate in the drug-selection process.

Florida already receives an average 19% rebate under federal law, and the drug companies would have to cut prices by another 6%, on average, to make the list. A panel of drug experts also considered medical factors in assembling the list. The state spent about $1.67 billion on prescription drugs in 2000 for its poor and disabled. Doctors would have to select drugs from the formulary list for their Medicaid patients or explain to a panel of experts why they chose to select a non-formulary prescription medication.

Instead of agreeing to the big price cuts demanded by the State of Florida in order to be included in the state's Medicaid formulary, Pfizer was the first drug company to agree to an innovative 2-year program that may save the Florida Agency for Health Care Administration up to $30 million. The pilot program features a technology based approach to the management of the 4 following chronic medical conditions; (a) congestive heart failure; (b) diabetes; (c) asthma; (d) hypertension.

Bristol-Myers Squibb Co. became the 2nd drug company to sign a deal with the state of Florida's Medicaid program. Under the agreement Bristol will have all their drugs included in the state's preferred Medicaid drug list, or formulary. The company will set up 2 community-based preventive care programs to save the state a guaranteed $16.3 million over 2 years. Under one of the programs the company will fund the hiring of health professionals and social workers to attend to Hispanic and African-American Medicaid beneficiaries with depression and HIV/AIDS, as well as breast, cervical and lung cancer. Under the other program, the company will fund the hiring and training of community residents to help overcome language and cultural barriers that can prevent a beneficiary with cardiovascular disease and depression from getting access to needed care. The company and the state hope that the programs will prevent trips to the emergency room or long hospital stays that could possibly be prevented.

The Iowa Priority Prescription Savings Program will go into effect January 1, 2002, as another state sets up a program to help reduce the cost of prescription drugs. The program was created through an alliance of seniors, physicians, pharmacists and pharmaceutical companies. To find out more about the program go to

The December 7, 2001 edition of the Wall Street Journal has an excellent article that deals with the topic of what the states are doing to try and lower their expenses in connection with prescription drugs. It is entitled " States Square Off Against Drug Firms In Crusade on Prices", and it is written by Russell Gold, Scott Hensley and Andrew Caffrey. It highlights the action being taken in the state of Michigan to try and rein in the rising costs for prescription drugs. A federal appeals court in Washington D.C. ruled in favor of the association in the case of PhRMA vs Thompson, which challenged the legality of the law in Vermont.

California's voluntary formulary plan is now expected to go into operation by the summer of 2002. Maine, Vermont and Florida have adapted either mandatory formulary plans which require either bigger price cuts from the drug companies, or allow the drug companies to try innovative approaches to help the state to ultimately reduce its prescription drug costs. PhRMA has brought legal actions against each of the three plans.

Under the California plan, the state's Department of Health would create a preferred list of drugs most commonly used by Medicare patients and negotiate rebates with manufacturers. Companies offering the most generous rebates would get on the list.

If the drug makers agree to the rebates, it is estimated that California participants could save anywhere from 5% to 15% on their most frequently prescribed medications. That would be on top of a 25% average retail discount they now receive under a 1999 law that requires pharmacists to sell to them at the same prices negotiated for Medi-Cal, the California version of Medicaid, the health-insurance program for the poor.

The National Bureau of Economic Research has declared that the nation is officially in a recession. Tommy G. Thomson, the federal secretary of Health and Human Services, approved a Florida proposal to provide drug discounts to Medicare beneficiaries similar to the approval given to Medicaid beneficiaries in the state. About 4.1 million Floridians are on Medicare or Medicaid. As discussed below the Pharmaceutical Research and Manufacturers of America has filed a lawsuit to stop the Florida program. As of last count there are now 31 states that offer some sort of prescription-drug assistance to their elderly or poor. PhRMA is expected to file another lawsuit against the federal government's approval of the Florida alternative rebate program as we discuss herein. Drugs account for $1.7 billion of the state of Florida's Medicaid totalbudget of $10 billion.

According to an article in the Wall St Journal entitled "States Battling High Drug Costs Appeal to Doctors", which was written by Russell Gold, 6 states have embarked on a counter-detailing program to try and lower their state's growing Medicaid prescription bill costs. According to figures released by IMS Health, a Westport, Ct. drug-marketing-research firm, the drug industry spent about $2.5 billion on direct-to-consumer advertising in 2000. IMS further estimated that the industry made over 61 million visits to doctors last year, and the industry spent about $4.8 billion on detailing in the U.S., which was up 11% from 1999.

The state of Florida sends out medical internists to a doctor's office to review his/her records in writing prescriptions. A comparason is made of the individual doctor's prescription writing records with other doctors to see how the physician stacks up in writing prescriptions which are on the state's preferred, lower-cost brand list.

Alabama, Arkansas, Maine, Michigan and Oregon have similar programs; Washington and Mississippi plan to start similar counter-detailing programs soon. The states do not compel the physicians to write prescriptions for the cheaper versions, since it is only pointing out the other medications that are available to treat the problem. Some states are using claims-data-management firms to zero in on doctors who have an inordinately high record for writing the most expensive prescriptions for their Medicaid patients. One such company is ACS State Health Care LLC of Atlanta, a subsidiary of Affiliated Computer Services Inc. of Dallas. Pharmacists are frequently used to deal with the doctors in this educational process discussion with the physicians.

Oregon is another state that is attempting to deal with the pricing of prescription drugs problem. Starting in September Oregon will attempt to evaluate prescription drugs just as any other commodity would be evaluated. The state has formed a commission of medical experts (Oregon Health Resources Commission) to examine the medical literature on therapeutic classes of drugs and determine which drug is the most effective in its class.

Physicians in the state-run Oregon Health Plan will be discouraged from, although not stopped from prescribing any drug that is more expensive, but not more effective than the selected drug. The state will disseminate the list of recommended drugs with the help of consumer-advocacy groups. Governor John Kitzhaber, a Democrat is a former physician himself. The Oregon Health Plan covers 260,000 Medicaid recipients and 90,000 low-income residents. The state expects to spend about $885.3 million on prescription drugs in the two-year budget cycle that began in June, 2001. Oregon is thus the 3rd state following Florida and Louisiana to create a preferred-drug list for Medicaid recipients.

The former New Jersey Acting Governor Donald T. DiFrancesco signed legislation expanding the state's Pharmaceutical Assistance to the Aged and Disabled Act. In its present form the plan cost $310 million last year, and covered over 190,000 disabled and elderly residents of the state. The new plan is expected to expand the coverage to an additional 100,000 of the elderly or the disabled. The program will be available to individuals earning up to $29,238 a year and couples earning up to $33,589 per year. Under the plan, which is called Senior Gold, a person would have to pay the first $15 of a prescription's cost and then split the rest of the cost 50-50 with the state. Once the individual has paid out $3,000 in a given year, he or she would have to pay no more than $15 for each prescription.

The Governor of the state of Washington opened up to any state resident older than 55 years the existing prescription deal that the state had arranged for its own employees. Seniors who want to participate can get a buyers-club card that allows them to obtain medications at 12% to 30% less than list price. There is no cost for obtaining this card, nor does a financial means test exist. Now the Washington State Pharmacists Association is complaining that pharmacists will have their net income cut by approximately $5000 per month if they join the program. If they do not choose to join the program, they risk losing their current state employee customers. Let us see how this plays out.

Maine is planning to bring down cost of drugs via a joint venture between Eastern Maine Healthcare and a Canadian pharmacy. Prescriptions written by doctors holding both Maine and Canadian licenses will be filled by the Canadian pharmacy and shipped directly to patients in Eastern Maine. It is estimated that patients will save up to 30% of the cost of medication in USA.

The General Accounting Office, the investigating arm of Congress has found 190 Web sites that are dispensing prescription drugs over the Internet. They found one of 8 filled orders with no prescription and another 27% provided the prescriptions themselves, only requiring the customer to fill out an online questionnaire. Some of these firms never gave a legal business name or even a contact address on their Web site.

South Carolina has prescription drug plan for low-income residents that became effective January 1, 2001. It is being paid for with a $20 million appropriation by the General Assembly. Governor Jim Hodges stated that the program was needed so that the state's elderly residents would not have to choose between food and medicine.

A clear cut pattern is developing as the Pharmaceutical Research and Manufacturers of America continues to bring legal actions to try and stop the enforcement of prescription drug plans enacted by the various states to help their elderly residents with their drug costs. In Vermont PhRMA has sued the federal government because of the Health Care Finance Administration's approval of the state plan to provide prescription drugs at discounted prices to seniors and low-income patients under 65.

The suit filed in federal district court in Washington asserted that the HCFA violated federal law by approving a waiver clearing the way for the Vermont plan. Under the Vermont plan individuals would be able to buy prescription drugs at the same price as Medicaid pays. That would mean the cost would be about 17.5% less than the drug companies would charge their other "favored" customers and about 30% less than what uninsured patients pay at the neighborhood pharmacy.

The plan went into effect in Vermont on January 1, 2001 and effects about 69,000 residents of the state. The program would be available to all seniors who aren't eligible for the state's current pharmacy-assistance program. It would also be available to uninsured younger residents whose income is about 300% of the federal poverty level, or about $25,000. PhRMA argues that HCFA did not have the authority to approve the Vermont waiver and that the plan would compel drug makers to vastly expand the number of discounts it provides. They further argue that under Medicaid, patients are supposed to receive an integrated package of services and not a stand alone drug benefit.

With all the rhetoric coming out of Washington regarding prescription drugs and Medicare it's time we looked at what the states have available to help the elderly with their prescription drug expenses. As a matter of fact Governor George W. Bush has proposed a temporary state-based prescription drug benefit program for low-income Medicare beneficiaries, followed by the major Medicare overhaul he advocates. In the first phase of the Governor's plan the federal government would offer the states $48 billion to initiate or expand state-run programs for low-income seniors. Former Vice-President Al Gore's plan called for Medicare itself to handle the drug benefit, while the President's plan calls for private insurance to take up the load once Medicare is overhauled. With both the drug and insurance industries calling for their own plan's who knows what if anything will eventually evolve as far as legislation goes?

As of the last count 38 states have passed some type of pharmacy-assistance law, so the states have at least been trying to deal with this problem on their own for quite a while. The plans vary greatly in range as to what is covered so we will try in this article to generalize the different plans that they have been passed and are actually operating. In one of our previous articles we have written about what New York State has done in this arena, i.e. see our article on New York State and the New Epic Plan which went into effect in January 2000. Nationwide about 70% of people enrolled in these programs live in 3 states i.e. New Jersey, New York and Pennsylvania.

The following list categorizes some of the different state plans now in effect:

As Rachel Zimmerman points out in her Wall Street Journal article, "States Pass Laws to Help Elderly Secure Medicines", several of the states are using money that they received in the tobacco settlements to help enhance their programs for coverage of prescription drug for elderly and low-income residents. Illinois is one of the states doing it with $35 million in tobacco money to expand its program.

Mike Klemens of the Illinois State Revenue Department points out that the participation rate is about 15% of the eligible seniors in his state. If you calculate the cost of the premium and the co-payment costs an individual would have to spend $381 a year on prescription drugs to come out ahead. According to a report from the U.S. General Accounting Office only 760,000 low-income seniors and others who qualify are taking advantage of such programs, but there are still 13 million Medicare beneficiaries who have no prescription drug coverage.

The following chart lists the 26 state's telephone numbers to call for information about pharmaceutical assistance programs in that state. As you can note we do not have all the states telephone numbers. If any of our viewers can supply the missing telephone numbers for the 5 other states we would deeply appreciate your help.

California 800 434-0222
Connecticut 860 423-5026
Delaware 800 996-9969 x 17
Florida 888 419-3456
Illinois 800 642-2459
Indiana 866 267-4679
Iowa Unknown
Kansas Unknown
Maine 888 600-2466
Maryland 800 492-1974
Massachusetts 800 243-4636
Michigan 517 373-8230
Minnesota 800 333-2433
Missouri Unknown
Nevada 800 243-3638
New Hampshire Unknown
New Jersey 800 792-9745
New York 800 332-3742
North Carolina Unknown
Oregon   Unknown
Pennsylvania 800 225-7223
Rhode Island 401 222-2880
South Carolina 877 239-5277
Vermont 800 529-4060
Washington Unknown
West Virginia 877 987-4463
Wisconsin   unknown
Wyoming 800 442-2766



By Allan Rubin and Harold Rubin MS, ABD, CRC, Guest Lecturer
updated February 8, 2010

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