Lembo says bulk medication purchases could save $66M next year

It will barely dent the largest budget deficit in Connecticut history, but state Comptroller Kevin Lembo today said the state can save between $66 million and $80 million next year simply by better coordinating how government purchases prescription medication.

Lembo, who took office in January, will ask the General Assembly to place authority for the roughly 9 million prescription purchases the Department of Social Services makes each year under his office. The comptroller, whose agency makes between 3 million and 4 million prescription buys annually, said the savings that could be negotiated by bulk purchasing and volume-related discounts are too large to ignore.

“We must seize this savings immediately,” he said, calling the proposal “an important step toward financial efficiency in state government.”

The comptroller’s office under Lembo’s predecessor, Nancy Wyman, began the gradual expansion of bulk purchasing of prescription drugs, offering voluntarily pooling programs to help cities and towns, nonprofits and small businesses to reduce costs. Wyman, who now serves as lieutenant governor, 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, Lembo added.

The Department of Social Services purchases 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 said he is confident that these purchasing efforts could be merged without triggering changes in coverage or price for state employees, retirees or health care program recipients.

“What we’re talking about is a change in the back end of the process” where the purchases are made, he said. “The front end … will remain the same.”

Lembo said he is confident that at least the $66.5 million savings could be achieved as early as the next fiscal year, which begins July 1, if Gov. Dannel P. Malloy’s administration and the legislature move quickly on the proposal.

There is the potential to increase the savings further, possibly by another $13 million, Lembo said. That would depend on whether the state can equalize the dispensing fees paid to pharmacists for filling prescriptions. Right now they are paid more for Medicaid patients’ prescriptions than for those for state employees and retirees. If the state can negotiate a reduced dispensing fee for the formr group without changing patient coverage, the $66.5 million savings could be expanded, he said.

Malloy’s budget agency, the Office of Policy and Management, has been briefed on the proposal and “I don’t anticipate much push-back,” Lembo said.

OPM Secretary Benjamin Barnes, Malloy’s budget director, said the administration is looking carefully at the comptroller’s plan, adding it has the potential to become a “very progressive example” of the efficiency in government Malloy has been calling for.

Medicaid represents one of the single-largest and fastest-growing components of the overall state budget, about $4 billion out of $19.01 billion. “Finding a cheaper way to buy pharmaceuticals for our Medicaid clients is a very important part our overall efforts to control Medicaid costs,” Barnes added.

Malloy must submit a plan to the legislature on Feb. 16 to close a $3.67 billion deficit projected for 2011-12 when he proposes the first budget of his administration. The shortfall is equal to nearly one-fifth of all current spending.