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CalPERS Rx Purchasing Bigger is Better

by Jerry Flanagan, 5:55 p.m. PST, (415) 633-1320

Assembly Bill 1958, to be voted on by the California Assembly Public Employees, Retirement, and Social Security Committee on Wednesday, will allow individual consumers, small business owners and others to share in the buying power of the nation's second largest purchaser of health care -- CalPERS, the California Public Employees Retirement System.

The proposal authorizes the health care giant to maximize bulk purchasing discounts by allowing patients and businesses to join a CalPERS-run drug purchasing pool. By doing so, CalPERS could achieve deeper savings on the prescription drugs it currently purchases for state workers and allow individual patients and business owners to benefit from negotiated bulk discounts.

Currently, the CalPERS purchasing pool includes 300,000 state employees. An additional 900,000 state employees are currently enrolled in health maintenance organization (HMO) plans, which include prescription drug coverage. CalPERS is considering ending prescription purchases in the HMO plans and instead including state HMO enrollees in the drug purchasing pool. Such a plan could significantly increase CalPERS' purchasing power, thus providing even deeper discounts on prescription drugs.

Since 1999, more than a dozen states have passed legislation implementing, exploring or promoting prescription drug bulk purchasing. In California, former Assembly Speaker and now L.A. City Councilman Antonio Villaraigosa has announced plans to develop a bulk purchasing pool for the nation's second largest city. San Francisco County is interest in a similar plan. The model is in vogue for its cost savings potential: the largest bulk purchasers, like the Canadian government and U.S. Department of Veteran Affairs, are able to negotiate bulk discounts of 30-60% off the list price of U.S. made prescription drugs.

(For an overview of state prescription drug bulk purchasing laws visit: http://www.ncsl.org/programs/health/bulkrx.htm#ca)