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PA Secretary of Public Welfare Urges General Assembly To Support Saving $100 Million Through Smarter Pharmacy Benefit Management
Date:6/17/2008

Richman Highlights $681 Million in Savings in Past 4 Years

HARRISBURG, Pa., June 17 /PRNewswire-USNewswire/ -- If state legislators are serious about saving taxpayer funds, they should support the Department of Public Welfare's plan to save $100 million a year by paying less for prescription drugs for children and families who receive health care through the Medicaid program, Secretary of Public Welfare Estelle B. Richman said today.

"Every budget season we hear a lot of rhetoric about how DPW 'could' save money - yet, the General Assembly has not embraced our commonsense and workable plan to reduce costs by assuming management of our pharmacy programs," Richman said. "Our plan makes sense for the consumers we serve, for doctors who want a unified system, and also for the taxpayers who pay the bills."

Currently, drug purchases are split between seven Medicaid managed care organizations (MCOs), which puts those firms in a weak bargaining position with big pharmaceutical companies. In addition, those organizations are ineligible for rebates available to the Medicaid program. Under federal law, only DPW can get those rebates.

When DPW becomes the single buyer, the state will have stronger purchasing power to negotiate better prices on medications - on average, saving 30 percent over the prices the managed care organizations pay. Also, DPW will collect every penny of available rebates.

Richman said 20 other states have implemented this change for some or all of their drugs, resulting in great savings for their taxpayers.

"The managed care organizations and pharmaceutical manufacturers that benefit from the status quo are fighting against this important proposal," Richman said. "We hope the General Assembly will put taxpayers first by supporting our plan to save $100 million a year."

Richman said the Department of Public Welfare, at Governor Rendell's direction, has achieved more than $681 million in savings in just the past four years.

Among the steps taken, the department:

-- Reduced the agency workforce by 1,000 positions since 2003, saving $70

million in salaries and benefits;

-- Adopted cost containment efforts, negotiated better contracts;

-- Minimized payments in error and maximized recoveries;

-- Achieved $140.7 million in third party liability cost recoveries in

2007; and

-- Made $24.9 million in recoveries for fraudulent and erroneous payments

in 2007.

Richman said new calls by legislators for DPW to blindly trim $1 billion from its budget would cause irreparable damage to Pennsylvania children and families who would lose benefits and eligibility; hospitals would get stuck with providing uncompensated care; and providers would get paid lower reimbursement rates.

In addition, Richman warned that the department's options for making budget cuts are limited under state and federal law. If enacted, state funding cuts would trigger even larger reductions in federal funds. Every $1 cut in state funding for DPW will result in a loss of about $1.20 in federal funds for the largest programs, including Medical Assistance, Long Term Living, and home and community services for persons with mental retardation.

According to Richman, an across-the-board 10 percent cut in funding could result in:

-- 197,000 people losing Medical Assistance;

-- A sharp reduction in nursing home reimbursement rates;

-- 3,200 elderly and people with disabilities losing home and community

services;

-- 1,818 new clients not receiving mental retardation waiver services;

-- 12,500 fewer people receiving mental health services;

-- 12,400 fewer children receiving child care subsidies; and

-- Reduced SSI supplements for personal care and domiciliary care residents

(from $439 to $327 per month).

"As we enter final budget negotiations, it is important for members of the General Assembly to recognize the gains the department has made in the past few years and help us continue to produce savings for taxpayers," said Richman. "Our goal is to provide the best possible service to our clients at the lowest cost to the public - and our pharmacy management initiative is a critical component of that ongoing effort."

CONTACT: Anne C. Bale

(717) 787-4592


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SOURCE Pennsylvania Department of Public Welfare
Copyright©2008 PR Newswire.
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