Medicaid Program Considers Money-Saver Plan

WASHINGTON – The federal government is expected to approve a joint drug-buying program that has saved states millions of dollars in prescription costs, Michigan officials said Thursday.

The six states participating in the program are Michigan, Vermont, New Hampshire, Hawaii, Nevada and Alaska. The program requires that they adopt a list of drugs that doctors should use when treating low-income Medicaid (search) patients. The states then bargain together for discounts on the drugs.

The decision could encourage other states to join similar agreements. Indiana, Illinois, Wisconsin, Kansas, Missouri and Tennessee have considered joining the Michigan program, and 40 states already have preferred drug lists in place, according to the National Conference of State Legislatures (search).

Michigan spent around $1 billion annually on prescription drugs before the program began in 2002. The state's Department of Community Health says the program saved it $40 million last year.

Michigan Gov. Jennifer Granholm said in February that the federal Centers for Medicare and Medicaid Services (search) was threatening to end the program because it wanted more companies to be able to bid to administer the program.

But the federal government insisted it wanted the program to continue. In a letter sent to Michigan officials last month, acting Medicaid and Medicare administrator Dennis Smith said Health and Human Services Secretary Tommy Thompson "has directed me to work through these issues with you to get an approval."

Drug companies and mental health advocates sued over the program in state and federal court, saying it would harm patients by limiting their access to drugs. The program requires patients to get special approval for drugs not on the list. Drug companies also must provide discounts to have their drugs listed.

The program's opponents also objected because Michigan proceeded without getting final approval from the federal government. But a federal judge ruled last year that the program was legal because Congress gives states broad authority to bargain for lower drug prices. The U.S. Court of Appeals recently upheld that decision.

The drug manufacturers' group, the Pharmaceutical Research and Manufacturers of America (search), did not immediately comment but said it would release a statement later Thursday.