Legislation Would Create Drug Purchasing Pool of State Agencies, Private Companies

California could save up to $100 million per year in prescription drug costs by forming a purchasing pool of various state agencies and private insurance purchasers that would negotiate drug prices directly with pharmaceutical companies, according to a bill introduced yesterday in the Senate, the San Francisco Chronicle reports (Colliver, San Francisco Chronicle, 1/25). According to the text of SB 1315, written by Sen. Byron Sher (D-Palo Alto), the "central purchasing agency" would include the departments of Health Services, Mental Health, Corrections, Youth Authority and Developmental Services; CalPERS; the State Teachers' Retirement System; and the California State University system. In addition, the bill says that "any state department, agency authority, institution or program," as well as "[a]ny business group, hospital, hospital associatio[n], or other private entity" could join the pool (SB 1315 bill text, 1/24). According to the state auditor, between fiscal year 1997 and FY 2002, drug costs for the "five state agencies that purchase the most drugs" in California have more than tripled, from $41.6 million to $135 million. The purchases currently being made by those five agencies make up 2% of an estimated $7 billion the state and private entities pay for prescription drugs each year. Jerry Flanagan, a health care and budget advocate for the California Public Interest Research Group, said that the purchasing pool bill is "kind of the Costco approach to things -- the larger the pool, the easier it is for the state to negotiate discounts. What this essentially does is give the state the power to negotiate for prices like Kaiser [Permanente, the state's largest HMO] and other large groups" (San Francisco Chronicle, 1/25).