Michigan Plans Multi-State Drug Purchasing Pool Under Gov.-Elect Granholm

Michigan Governor-elect Jennifer Granholm (D) plans to establish a multi-state compact to lower drug costs by purchasing prescription drugs in bulk.

Reducing the price of prescription drugs was a focus of Attorney General Granholm's campaign. Legislation creating the Midwest Pharmaceutical Compact was co-sponsored by state senator John Cherry, who ran on the Granholm ticket for lieutenant governor.

The Midwest Pharmaceutical Compact (SB 1392), introduced in August, says that Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio and Wisconsin are eligible to participate; the Canadian province of Ontario is also allowed to join. Three states need to enact the compact into law before Dec. 31, 2004 for it to take effect.

The program would purchase pharmaceuticals for Medicaid beneficiaries and state Rx healthcare recipients. A commission comprised of representatives from each state or province would negotiate pharmaceutical prices with manufacturers.

Michigan already has a supplemental rebate program for its Medicaid program. Drugs for which rebates are not offered are put on prior authorization. The Pharmaceutical Research & Manufacturers of America is awaiting decisions in federal and state court on its suits against the program (¹ (Also see "Michigan Rx Rebate Program Decision Should Be Left To HHS, DoJ Tells Court" - Pink Sheet, 2 Sep, 2002.), p. 6).

Although Republicans control the White House, Senate and House, presumably providing a more comfortable climate for the pharmaceutical industry, states can be expected to continue to pressure brand name drug manufacturers for pricing concessions for state health programs, or push for greater generic drug use.

Several large states, with correspondingly large state-run drug programs - including Illinois, Michigan, Pennsylvania and Wisconsin - changed from Republican to Democratic governors. The increase in the number Democratic governors and the slowing economy could help bring Medicaid reforms to the forefront of the healthcare policy debate. The House Energy & Commerce Committee has already expressed an interest in looking at Medicaid reforms (² (Also see "House Commerce Committee’s Fall Agenda Includes Medicaid Hearings" - Pink Sheet, 9 Sep, 2002.), p. 19).

Having state governorships essentially equally divided between the parties could provide Democrats in Washington with extra leverage when debating prescription drug policy.

Michigan Sen. Debbie Stabenow (D) has introduced legislation to assist states in implementing drug-cost reduction programs. Her amendment to the Senate-passed generic drug bill (S 812) would expand states' ability to negotiate lower drug prices for low income assistance programs (³ (Also see "Senate Medicaid Supplemental Rebate Amendment May Block PhRMA Suits" - Pink Sheet, 22 Jul, 2002.), p. 22).

The Granholm administration will "partner with [Stabenow] to push for her fair pricing legislation and the ability to extend the Medicaid discount on prescription drugs to the uninsured," Cherry said during a campaign stop in October.

Illinois, which has a prior authorization program for Medicaid, elected Rep. Rod Blagojevich (D) as governor.

PhRMA challenged a similar program in Florida. The Eleventh Circuit Court ruled against PhRMA, upholding the state's preferred drug list (⁴ 'The Pink Sheet' Sept. 16, In Brief). PhRMA has not decided what action it will take regarding the Illinois program.

In Wisconsin, Governor-elect Jim Doyle (D) plans to address prescription drug costs. Doyle, the state's attorney general, defeated Gov. Scott McCallum (R), who succeeded HHS Secretary Tommy Thompson. Thompson's brother, Ed Thompson, ran as a libertarian.

Doyle's campaign materials say he will combine all Rx purchasing by state programs into a single, state-managed purchasing pool. He also plans to partner with other states to purchase pharmaceuticals.

In Connecticut, Gov. John Rowland (R) was elected to a third term. Rowland attended the PhRMA annual meeting in March (⁵ (Also see "Conn. Formulary Suit Dismissed: State Lacks Standing, Appeals Court Says" - Pink Sheet, 8 Apr, 2002.), p. 20).

Another New England state, Maine, elected Democratic Rep. John Baldacci to succeed term-limited Angus King (I). The state is involved in a lawsuit brought by PhRMA challenging the "Maine Rx" program. The Supreme Court is expected to hear the case in January.