Michigan Welcomes Approval of First-Ever Multi-State Prescription Drug Pooling Program

Contact: T.J. Bucholz (517) 241-2112
Agency: Community Health

April 22, 2004

Michigan Governor Jennifer M. Granholm today said federal approval from the Centers for Medicaid and Medicare Services (CMS) of the nation's first-ever multi-state prescription drug purchasing pool will ensure lower prescription drug costs for more than 1.3 million Michigan citizens.

"Our hard work together in Michigan – and with our partners in Vermont – has finally paid off and will subsequently reap millions of dollars in savings for prescription drugs in the state's Medicaid program," Granholm said. "As our partnerships with other states continue to blossom, the true beneficiaries of our work will ultimately be our state's most vulnerable citizens."

Granholm first pioneered the now federally titled Michigan Multi-State Prescription Drug Initiative with Governor Douglas of Vermont during a February 2003 meeting of the National Governor's Association in Washington, D.C.

In March 2003, both Vermont and Michigan authorized their pharmacy benefits administrator, First Health Services, to simultaneously negotiate with pharmaceutical manufacturers, using the combined purchasing power of the pooled states' Medicaid drug programs, to try to negotiate deeper discounts, known as supplemental rebates.

Michigan and Vermont, co-founders of the Michigan Multi-State Prescription Drug Initiative, have each generated significant levels of additional savings and rebate revenue as a result of their participation in the nation's first Medicaid multi-state pooling initiative.

The federal approval now allows a five-state partnership between Michigan, Vermont, Nevada, New Hampshire, and Alaska. On Monday, the state of Hawaii announced that it would be the sixth state to join in the pooling program.

Janet Olszewski, Director of the Michigan Department of Community Health, said Medicaid drug management programs have significantly reduced the rate of growth of the Michigan Medicaid pharmacy program since their inception in 2002.

"Our staff at the Department of Community Health have worked over the course of the last year to answer federal questions and make this concept a reality," Olszewski said. "As a result of the Michigan Multi-State Prescription Drug Initiative, the total number of participating manufacturers more than doubled from 12 manufacturers in the first year of the program in Michigan and Vermont to 27 participating in the pooling program as of today. As we add more states to this initiative, our savings will continue to increase."

Unlike typical price control programs - such as Canada's - where the government sets prices, the states can now use a competitive bidding process that allows manufacturers to work with states and lower their prescription drug prices. Under Medicaid preferred drug list programs, savings generated as market share are shifted to more cost-effective preferred drugs.

Manufacturers of the preferred drugs then pay states additional discounts, known as supplemental rebates, which are returned to states as rebate revenue.