California Launches ‘Voluntary’ Medicare Rx Drug Program

In a "first-in-the-nation program," California will begin asking pharmaceutical companies to offer "voluntary" discounts on "commonly used drugs" for seniors and people with disabilities, the Wall Street Journal reports. SB 696, signed by Gov. Gray Davis (D) last month, will create a state-administered purchasing pool of 1.3 million Medicare beneficiaries to negotiate rebates from drug manufacturers. As part of the program, California's Department of Health Services will create a "preferred list of drugs" and negotiate discounts with the manufacturers of those drugs. The state would add to the preferred list the pharmaceutical companies offering the "most generous" discounts, who would have access to the large pool of buyers. "We're selling market share for rebates," Stan Rosenstein, assistant deputy director of the department's medical care services, said. California officials plan to have the program running by next summer.

According to the Journal, the California program "differs from mandatory cost control initiatives" adopted in Maine, Vermont and Florida, which have met opposition from industry representatives. Lawsuits filed by the pharmaceutical industry have blocked the Maine and Vermont programs, while industry suits are pending on another Maine drug program and the Florida plan. Marjorie Powell, assistant general counsel for the Pharmaceutical Research and Manufacturers of America, said it is "hard to predict" whether drug makers will choose to participate in California's program, but noted that companies have offered rebates in the past to purchasing pools organized by not-for-profit groups and state programs. California officials estimate that if companies choose to participate, state Medicare beneficiaries could receive discounts between 5% and 15%, in addition to the 25% average retail discount they already receive through SB 393, passed in 1999. If the program is unsuccessful, Sen. Jackie Speier (D-Hillsborough), who sponsored the voluntary rebate measure, said she has mandatory rebate legislation "at the ready," adding, "I'm going to give them the opportunity to show me the rebate" (Caffrey/Gavin, Wall Street Journal, 11/7).