Bulk Purchasers Seek Drug Discounts
The Department of Veterans Affairs and other "big buyers" are using their bulk purchasing power to "extrac[t] steep price cuts from pharmaceutical companies on some of their brand-name medicines," the Wall Street Journal reports. The increased competition is driven by a number of factors, including slowing development of new medicines, increasing availability of generics and "the growing clout of bulk buyers," such as the VA and pharmacy benefits managers, the Journal reports.
According to the Journal, the "rivalry is often hot even in cases where generics are either unavailable or not used widely."
For example, after VA pharmacists declared last year that the brand-name impotence drugs Viagra, Cialis and Levitra were equally safe and effective, the VA negotiated a deal in which it pays $2.58 per Levitra tablet, compared with about $4.90 it had been paying per Viagra tablet. The VA -- which provides health care to more than five million veterans -- made Levitra its preferred erectile dysfunction treatment, and the medication's share of total ED pills dispensed increased from 1.5% before the change to 89% in April.
Meanwhile, the enrollment of millions of Medicare beneficiaries in private drug plans through the new prescription drug benefit has given some large insurers more leverage to negotiate prices for medications. For example, UnitedHealth Group, Humana and WellPoint -- which account for the bulk of Medicare drug plan enrollments -- currently are negotiating deals with drug makers for preferred medications for 2007, the Journal reports.
Drug makers are required by law to offer Medicaid the lowest price they had negotiated with any other buyer, which led to significant discounts for that government program but "effectively capped the discount on drugs to other buyers," according to the Journal. However, drug prices negotiated under the Medicare drug benefit do not count toward the Medicaid price-discount requirement, which makes manufacturers more willing to reduce prices in contract negotiations, the Journal reports (Hensley, Wall Street Journal, 6/22).