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Executive Summary

Barr, Boots, Goldline, Rugby, and Schwarz/Kremers-Urban are the winners in Georgia Medicaid's first round of competitive bidding. The state program selected 13 products to be granted exclusive one-year reimbursement contracts. The contracts begin July 1. Winning bids include Schwarz Pharmaceutical/Kremers-Urban for nitroglycerin transdermal 5 mg patch, nitroglycerin 10 mg patch, and nitroglycerin 15 mg patch; Goldline Laboratories for nitroglycerin 2% ointment and cyclobenzaprine 10 mg tablets; and Rugby Laboratories for potassium gluconate 5 meq/500 mg tablets, albuterol 2 mg tablets and albuterol 4 mg tablets. Other winners are Barr Laboratories for cephradine suspension 125 mg/5 ml, cephradine suspension 250 mg/5 ml, cephalexin monohydrate 250 mg tablets, and cephalexin monohydrate 500 mg tablets; and Boots Pharmaceutical for erythromycin 333 mg tablets. Pharmacies were informed of the selections in a May 17 letter from state Medicaid Commissioner Aaron Johnson. Each company will give a rebate based on the volume of the product used. While the state does not have an official savings prediction, the rebate amounts and utilization projections indicate savings could reach about $250,000 for the year. The rebate amounts range from 0.001 cents for each 2 mg albuterol tablet or each gm of nitroglycerin 2% ointment, to 0.614 cents per nitroglycerin 10 mg patch. The largest potential savings could come from nitroglycerin 5 mg patches -- the state projects that up 259,000 patches will be used over the year at a rebate of 0.532 cents per patch, for savings that could top $137,000. Alternative brands to those selected will be reimbursed only if a patient's physician has obtained advance written agreement from the state that the alternative is needed, the state's letter notes. For some categories, the state decided that no bids were acceptable, and instead will impose maximum allowable cost limits. An example is prazosin 1, 2 and 5 mg tablets. The carrot in the program is the exclusive contract for selected companies. The stick is the delisting of all multi-source products from companies that decided against bidding. The delisting will affect approximately two dozen companies including Abbott, Beecham, Bristol-Myers Squibb, Ciba-Geigy, Eli Lilly, Glaxo, ICI, Key, Marion Merrell Dow, and McNeil, according to the letter. Others striken from the Georgia program are Mead Johnson, Merck, Parke-Davis, Pfizer, Sandoz, Schering-Plough, Syntex, Upjohn, Wyeth-Ayerst and Zenith. A "few exceptions" will be made for drugs with narrow therapeutic ranges "which makes them difficult to interchange" or other special characteristics. Examples cited are Tegretol (Ciba-Geigy's carbamazepine), theophyllines, and amoxicillins. One state official commented that this sanction was imposed to indicate to drug companies that "we mean business." While a number of states have proposed or are considering bidding/rebate programs, few have been able to put such programs into operation. At this time, the state is not planning another round of bidding. However, a state law signed in April specifies that if a drug company fails to negotiate or renew a rebate agreement, the state may itself set a rebate amount based on the most favorable price the company gives to other purchasers. The law also revised the definition of drug product suppliers subject to the bidding rules, in order to protect the state from lawsuits. While pushing for enactment of that law, state officials went ahead with a request for bid proposals issued in February.

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