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BURROUGHS WELLCOME OFFERING MEDICAID "BEST" PRICES FOR OPEN FORMULARIES: LYPHOMED PROVIDING NEBUPENT "GRANTS"; 3M-RIKER, PARKE-DAVIS OFFERING REBATES

Executive Summary

Burroughs Wellcome is offering state Medicaid agencies assurances of the company's "best price" for AZT and its other single-source outpatient products in return for open access to those products. In addition to AZT, products that would be covered by the "Medicaid Open Access Plan" include Zovirax (acyclovir), Imuran (azathioprine) and Wellbutrin (bupropion). The plan does not involve branded multi-source drugs, such as Septra (sulfamethoxazole). Burroughs Wellcome said it is currently negotiating its drug rebate proposal with about 12 state Medicaid agencies and expects to announce at least one signed contract in the next week. In an Aug. 28 letter to Medicaid agencies in all 50 states, Burroughs Wellcome explained that its plan will "protect the states from price increases that occasionally occur, such as when published price increases exceed those agreed upon in federal government contracts." Under the plan, prices to Medicaid would be equivalent to prices being charged at a given time under federal contracts, such as those with the Veterans Affairs Department or the Department of Defense. Under the government contracts, the company's agreed-upon prices are frozen during the length of the contract. However, under Burroughs Wellcome's offer to the state Medicaid agencies, the "best price" would be available only during the life of the government contract. If price increases are instituted, Burroughs Wellcome will rebate the difference between the higher price and the "best price" on a quarterly basis. Judging from a price comparison list submitted by Medi-Cal Drug Discount Program Director Jim Parks in congressional testimony on Sept. 14 and 17, California calculates substantial price breaks from B-W's best price. For example, Medi-Cal previously paid $75.35 for a bottle of 100 tablets of the firm's immuno-suppressant Imuran 50 mg. However, the state has determined that the lowest price made available by Burroughs Wellcome for the product is $58.96 -- a difference of 28%. Medi-Cal's price for Burroughs Wellcome's antiviral Zovirax is $63.74 compared to the best price found by the state: $54, a price difference of 18%. The firm's anti-AIDS product Retrovir is priced at $137.02 to Medi-Cal, 14% higher than the best price found by California, $120.19. Lyphomed has proposed a rebate program for its pentamidine to non-Medicaid purchasers and, at the same time, is offering no-strings grants to Medicaid. The proposal was announced to purchasers in late August. The plan combines marketing incentives with a goodwill campaign. Under the proposal, rebates would be offered to hospitals, buying groups, physicians, clinics, home care firms and retail pharmacies if purchases are increased in the second half compared with the first half of 1991. Rebates could be as high as 10% on incremental sales, the company predicted. The proposal has the potential advantage of minimizing the impact of generic competition; exclusivity for injectable use of Lyphomed's 300 mg/vial of pentamidine (Pentam) expires in October 1991. The firm is also proposing to provide matching grants to Medicaid agencies based on rebates provided to non-Medicaid purchasers in a given state. The grant funds would not be contingent on product purchases or access to formularies. Funds would be expected to be used for HIV-related services. Under a separate "goodwill" program for indigent patients, Lyphomed has provided its aerosolized pentamidine free to health facilities for indigents. To date, over 10,000 vials of product have been dispensed to 150 health care groups under the program. Separately, 3M/Riker is also developing a Medicaid discount plan. The firm has been discussing possible approaches with the Florida and Ohio agencies and expects to firm up details and circulate the plan more widely in the near future. The plan includes percentage rebates per prescription provided by the firm in return for open access for its entire product line, single- and multi-source. Parke-Davis signed an agreement with California's Medi-Cal program on Sept. 20. Under the contract, Medi-Cal will add four Parke-Davis products to the state formulary: the lipid-lowering agent Lopid, the transdermal nitroglycerin anti-anginal product Nitrostat, and the oral contraceptives Norlestrin and Loestrin. In addition, Dilantin will remain on the Medi-Cal formulary. Lopid is the key to the agreement for Parke-Davis because it means the anticholesterol product will be able to compete against Merck's Mevacor within the substantial Medi-Cal market. Merck signed the first rebate agreement with California last spring ("The Pink Sheet" June 25, p. 5). In addition to Parke-Davis and Merck, California has drug price discounts with three other companies: Glaxo, Searle and Syntex. Parke-Davis and Medi-Cal are expected to announce the agreement during the week of Sept. 24. Neither party was willing to make early disclosure regarding the nature of the price discounts.
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