Proposals sought for discounts on L.A. prescriptions.

As political pressure mounts to confront rapidly rising prescription drug prices, the city of Los Angeles is getting into the act.

In the largest municipal effort to date to rein in prescription drug costs for residents, the city will soon be seeking proposals from the private sector to administer a discount drug purchasing program open to all city residents and many businesses.

The Los Angeles City Council gave the go-ahead for city staff workers to develop the request for proposals within 90 days, with an eye towards having a drug discount program up and running within a year.

"This is drug purchasing in bulk for those who fall in the middle: above the very poor who get Medicaid yet not fortunate enough to have adequate prescription drug coverage," said City Councilman Bill Rosendahl.

City officials are initially targeting 800,000 uninsured or underinsured residents. As currently envisioned, each of these residents would receive cards making them eligible for discounts of between 15 percent and 40 percent from the full price of many of the most common prescription drugs.

Businesses in L.A. would also be able to distribute drug discount cards to their workers, although it's unclear whether companies would have to pay for the cards.

"Employers not able to afford health insurance can at least suggest this to their employees as a way to get some coverage," said Richard Brown, director of the Center for Health Policy Research at the University of California Los Angeles and an early advisor on the city's drug discount program.

Momentum for drug discount plans has gathered steam in the face of steeply rising drug costs and the failure of Congress last year to approve the importation of cheaper pharmaceuticals from Canada.

The City Council initially gave conceptual approval to the prescription drug discount plan in May, at the urging of plan author and then-Councilman Antonio Villaraigosa, who developed the plan along with the Foundation for Taxpayer and Consumer Rights, a consumer watchdog group.

On Nov. 16, with Villaraigosa now mayor, the council gave formal approval, ordering city staff to implement a plan.

Key to the program will be how many people can be enrolled: the larger the pool, the more bargaining power that the pharmaceutical benefits manager can have with the major drug companies.

Unlike Proposition 79 that voters rejected on last month's special election ballot--where drug companies' lucrative Medi-Cal contracts would have been contingent on participation in the drug discount program--the city's program would be voluntary for drug companies.

Supporters say it's a chance for the pharmaceutical industry to show that a voluntary approach can work, so as to head off more stringent price controls down the line.

"It's an interesting concept. It's possible that some low-income and uninsured who don't already qualify for the more than 200 assistance programs already out there could be helped by this," said Wanda Moebius, spokes woman for the Pharmaceutical Research and Manufacturers of America.

But Moebius said the industry is reserving judgment until the request for proposals is complete and bids from pharmaceutical benefits managers start coming in.

L.A.'s business leadership is also examining the plan with interest. "We think this is an idea worth considering," said Brendan Huffman, director of public policy for the Los Angeles Area Chamber of Commerce. "So many employers in the city are small and can't afford health care benefits for their workforces. If done right, this could help fill the void."

Two models have emerged for how to administer the program. The Wisconsin approach--dubbed the Costco model--requires an upfront "membership" fee of $25 a year to pay for the cost of the program. Enrollees then pay anywhere from 15 percent to 40 percent less than market price for hundreds of covered prescription drugs. The program is administered by Nativus Health Solutions, a Madison, Wis.-based health management company.

The other, adopted by Nassau County on New York's Long Island, has no up-front fees. Instead, the pharmaceutical benefits management company, Caremark Inc., takes a small cut off the top of the reduced price of the prescription drugs to pay for running the program. Even so, the price of prescription drugs is typically reduced about 25 percent, according to the Nassau County Comptroller's office.

For example, the commonly prescribed allergy drug Allegra, costs anywhere from $87 to $113 for a 30-day supply at area pharmacies. Nassau County's drug discount program knocks about 31 percent Off the lowest retail price, for a price of about $60.

When the L.A. City Council gave its initial approval to the program in May, Villaraigosa cited the Wisconsin "Costco" model. But which version is actually chosen will likely depend on the bids that come in from pharmaceutical benefits managers, according to Maryanne Keehn, director of employee benefits for the city, who is helping to develop the requests for proposals.

Also unclear is the extent to which employers will be targeted as the means for dispensing drug discount cards. Keehn said the city would likely first try a direct-mail approach to residents and then move on to informing employers. "It's likely something will be sent out to all licensed businesses in the city," she said.