Health agency approves five-state pool to purchase Medicaid prescription drugs

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The Department of Health and Human Services has approved a plan allowing five states to pool purchasing power so they may negotiate cheaper prescriptions drugs with manufacturers for Medicaid beneficiaries. The implications could have a significant impact because it's the first time states have collaborated under the Medicaid program to negotiate lower drug costs, Centers for Medicare and Medicaid Services Administrator Mark B. McClellan told the New York Times.

The five states in the pool -- Alaska, Michigan, Nevada, New Hampshire and Vermont  -- are expected to save more than $12 million this year under Medicaid, according to HHS. The five states combined reach more than 900,000 Medicaid recipients.

The project began in February 2003. The states will use the same company, First Health Services of Glen Allen, VA, to negotiate with manufacturers. The combined group will use a competitive-bidding process to try to lower prescription drug prices.

New Hampshire's Gov. Craig Benson said three more states, Minnesota, Hawaii and Tennessee, intend to join the pool. Federal officials have not said whether they intend to limit the number of states in the pool.