California Proposes to Flex Its Buyer Power By Consolidating State Prescription Drug Purchasing

An executive order consolidating prescription drug acquisition pricing in California has already been signed and taken effect.  As Governor Newsom took to social media to explain, this means Medi-Cal (roughly 2 million Californians alone), CALPRS, Dept. of Veterans affairs and Dept. of Corrections and Rehabilitation will now bargain collectively for prescription drug acquisition price contracts covering roughly 13 million covered lives.  This contemplates a long overdue expansion of Medi-Cal's mighty purchasing power to other non-Medi-Cal entities that have had to acquire certain prescription drugs at prices that reportedly  far exceed Medi-Cal's acquisition cost. I have blogged about this before.

Such a change would likely markedly impact the Department of Corrections most immediately, where  California's sentencing practices have created a demographic where a significant percentage of the prison population is of advanced age as well as medically complex. The Department of Corrections has been candid about its disappointment in being denied Medi-Cal acquisition rates for prescription drugs.

Just what is the spread between Department of Corrections and Medi-Cal's prescription drug acquisition cost?  Ah, that is — in part — proprietary information.  The pharmaceutical manufacturers do not want the left hand to know what the right hand is doing, lest other government agencies demand to be in on the deal and lest private purchasers also demand Medi-Cal acquisition cost pricing.

You see, California's lower prescription drug discounts could be from the undisclosed cross-subsidization of others, precisely those others who now seek to access the Medi-Cal acquisition cost. 

So, who's left to the be cross-subsidizer?  Buyers in other states? As Governor Newsom notes in his video, California's actions here may well create incentives for other states to follow suit.  This could get interesting.



1 thought on “California Proposes to Flex Its Buyer Power By Consolidating State Prescription Drug Purchasing”

  1. Interesting. Just worth to note, that not only prices and collective bargaining power or capacity are the issue of that executive order, but also, informational issues,here I quote Article 6 to the executive order :
    To the full extent permitted under law, all agencies under my direct executive authority shall cooperate with providing data and other information to the Department of General Services to assist the Department in developing a list of prescription drugs that could appropriately be prioritized for future bulk purchasing initiative. Agencies not under my direct executive authority are requested to do the same.


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