Bulk purchasing of medication can reduce state budget deficit, comptroller says

The state’s chief fiscal watchdog is asking legislators and Gov. Dannel P. Malloy’s administration to take a second look at how government buys prescription medications — and a proposal he thinks could save more than $65 million over the next fiscal year.

Comptroller Kevin P. Lembo said purchasing medications in bulk for social service recipients as well as for state employees and retirees could happen as early as this spring, and could ease both the current budget deficit and the projected shortfall for 2013-14.

“I feel we as a state have wasted some time and left some money on the table,” Lembo said Friday.

Kevin Lembo 11-26-12

Comptroller Kevin Lembo: ”… we as a state have wasted some time and left some money on the table.”

At issue are roughly 9 million prescription purchases the Department of Social Services makes each year, and another 3 million to 4 million prescription buys that the comptroller’s office makes annually to serve state workers, retirees and their dependents. By coordinating all purchases through the comptroller’s office, the state could secure significant volume-related discounts, Lembo said. He estimated the annual value at $66 million to $80 million.

The comptroller’s office under Lembo’s predecessor, Nancy Wyman, began the gradual expansion of bulk purchasing of prescription drugs, offering to pool programs to help cities and towns, nonprofits and small businesses to reduce costs. Wyman, who became lieutenant governor two years ago, had raised the prospect of coordinated drug purchases with DSS under former Gov. M. Jodi Rell’s administration, but no agreement had been reached.

Merging the two largest medication purchasing programs in state government was a logical extension of that effort, according to Lembo, who first raised the issue in February 2011.

DSS buys prescriptions for patients served by Medicaid, HUSKY, the Connecticut Pharmaceutical Assistance Contract to the Elderly and other health care programs for the poor, elderly and disabled. The comptroller purchases medications for state employees, retirees and their dependents.

Lembo has said he is confident that these efforts could be merged without triggering changes in coverage or price for state employees, retirees or health care program recipients.

Many of the benefits DSS regulates are governed by federal Medicaid rules, which would block such a merger if it changed patient access to medications in a significant way.

But Lembo said he’s not only confident a merged system would not conflict with Medicaid’s patient access standard, but — based on preliminary talks with officials at the U.S. Centers for Medicare and Medicaid Services — Connecticut wouldn’t even need to apply for a formal Medicaid waiver to link its prescription purchasing efforts.

The legislature never acted on the comptroller’s proposal during the spring of 2011. At that time, the Malloy administration was negotiating a complex concessions package with state employee unions that included several health care changes, and Lembo said there was a wait-and-see attitude of resolving the labor talks before exploring new options for health-care savings.

“It didn’t get a lot of attention at the time,” he said, adding that it also didn’t spark any strong opposition.

Malloy’s budget office didn’t comment on the Lembo proposal Monday.

But the administration must offer plans in December to close a 2 percent deficit projection, about $365 million, in the current state budget. That gap was driven largely by a combination of declining revenue estimates and surging demand for state-sponsored medical services for the poor.

And in February the governor must outline a plan to balance finances for the 2013-14 fiscal year, which analysts say are on pace to run $1.1 billion to $1.2 billion in the red.