West Virginia's Rx for drug costs: West Virginia's new prescription drug program is being called "the mouse that roared.".

A pathbreaking resolution passed unanimously by both houses of the West Virginia Legislature could lower the cost of prescription drugs for all West Virginians, and be replicated by other states.

Passed during a special two-day session in late November, the resolution creates a new cabinet-level office, the Pharmaceutical Advocate, to negotiate prescription drug prices for public programs, including state employees, Medicaid, Workers Compensation and the Children's Health Insurance Program. As a benchmark, the advocate would use the federal supply schedule, which the federal government rises to negotiate lower prices for its veterans homes, prisons, and other low-income programs.

Establishment of the advocate office was a requirement of a more comprehensive prescription drug law the legislature passed last April. It also set up a state-sponsored prescription drug discount card program for low-income residents. It calls for the state to investigate the feasibility of buying prescription drugs from Canada, including the possibility of becoming a wholesale distributor in the state. And it requires drug companies to report advertising costs.

If the advocate program works, West Virginia could save substantial amounts of money. On average, the federal prices are about 42 percent of retail. The federal prices are also 18 cents per pill lower than the prices the West Virginia Public Employee Insurance Agency pays, and 35 cents per pill lower than what Medicaid pays.

Once the program is up and running, any private entity, including senior service organizations and agencies and even pharmacies, could join and get the lower prices, says House Speaker Bob Kiss, who initiated the legislation. "The long-run intention is for all citizens of the state to benefit from the initiative, not only those who acquire their drugs through the state insurance systems," he says.

The advocate, whose office would be located within the recently formed West Virginia Pharmaceutical Cost Management Council, would develop a common preferred drug list and prior authorization process for all pharmaceutical purchases for state agencies. The advocate also could contract with prescription drug wholesale firms or act as wholesaler to local pharmacies, once drug prices are negotiated with the manufacturers.

The industry says West Virginia is wrong to narrow the role of the advocate office to just pharmaceuticals. "We think it's important to look at health care as a total package," says Wanda Moebius, director of communications for PhRMA. "By focusing only on pharmaceuticals, West Virginia is missing the broader needs of health care." She points to Pennsylvania's health advocate who deals with the overall health of the state's citizens.

"We're treading on new ground with this proposal, but we believe it has great merit," Kiss says. "This legislation is only the beginning, providing the framework for implementation." The program's success is largely contingent upon joining together with other states to ensure sufficient leverage. "Several state leaders have already expressed interest. It's a problem that touches every state, and I believe many others will come oil board," Kiss says. West Virginia may join with other multi-state purchasing alliances, and other states may join West Virginia in its strategy.

"We definitely could not force the pharmaceutical industry to give us the discounts, but we spend a lot through Medicaid and state employees (so we have significant buying power)," says Stacey Ruckle, spokeswoman for the House of Delegates. "We've been called the mouse that roared, and you could say we are."

Prescription drugs are the single largest cost of the state's Medicaid program, which pays more than $370 million a year for the 300,000 beneficiaries in the program.

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West Virginia also is the defacto leader of a five-state pharmaceutical buying program, which some see as a template for multi-state pooling to achieve deeper discounts.

The program was started in 2003 by West Virginia, along with Delaware, Missouri and New Mexico. Ohio joined in July. Under the name Rx Issuing States (RXIS) the group selected a single pharmacy benefit manager, ExpressScripts. RXIS now covers 700,000 people. One innovative feature: the states receive I00 percent of the rebates provided by pharmaceutical manufacturers.

West Virginia estimates a $25 million savings over three years, or a 5 percent savings over its previous costs. Ohio says it will save $5 million a year, New Mexico estimates $2 million. So far the program serves only public employees who already get state health benefits, plus West Virginia's State Children's Health Insurance Program. (SCHIP) enrollees.--Richard Cauchi, NCSL 

Christina Kent is the editor of NCSL's State Health Notes A version of this piece first appeared in its Dec. 15, 2004 edition.