Market power and state costs of HIV/AIDS drugs
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Market power and state costs of HIV/AIDS drugs Arleen A. Leibowitz · Neeraj Sood
Received: 30 August 2006 / Accepted: 15 March 2007 / Published online: 5 May 2007 © Springer Science+Business Media, LLC 2007
Abstract We examine whether U.S. states can use their market power to reduce the costs of supplying prescription drugs to uninsured and underinsured persons with HIV through a public program, the AIDS Drug Assistance Program (ADAP). Among states that purchase drugs from manufacturers and distribute them directly to clients, those that purchase a greater volume pay lower average costs per prescription. Among states depending on retail pharmacies to distribute drugs and then claiming rebates from manufacturers, those that contract with smaller numbers of pharmacy networks have lower average costs. Average costs per prescription do not differ between the two purchase methods. Keywords Market power · State pharmaceutical costs · HIV/AIDS drugs · AIDS drug assistance program
Introduction The AIDS Drug Assistance Program (ADAP) is the payer of last resort for HIV-related prescription drugs to underinsured and uninsured persons living with HIV (PLH) in the United States. Congress first authorized funds for AIDS medications in 1987, and the program was later incorporated into Title II of the Ryan White Comprehensive AIDS Resources Emergency Act (CARE) in 1990 as the AIDS Drug Assistance Program. ADAP is not an entitlement program, in which federal funding is available for all individuals who meet the eligibility criteria. Rather, the federal funding is in the form of a block grant and states have the option to
A. A. Leibowitz (B) UCLA School of Public Affairs, 3250 Public Policy Building, Box 951656, Los Angeles, CA 90095-1656, USA e-mail: [email protected] N. Sood RAND Corporation, 1776 Main Street, Santa Monica, CA 90407, USA e-mail: [email protected]
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supplement their Title II ADAP Earmark allocation with other federal CARE Act revenues, state general revenue funds and rebates from drug manufacturers. States also have latitude in how they organize the purchase of drugs, in which drugs they include in the formulary, and in determining financial eligibility criteria for who gets served. Not surprisingly, there is wide variation in how states manage their ADAP program. For example, Maryland, Massachusetts, New Jersey, and Ohio cover PLH with incomes up to five times the Federal Poverty Level (FPL). In contrast, North Carolina sets its financial eligibility ceiling at 125% of the FPL (Kates, Penner, Crutsinger-Perry, Carbaugh, & Singleton 2006). States have also adopted different mechanisms for purchasing ADAP drugs. Thirty state or territorial programs currently negotiate discounts from list prices directly with pharmaceutical manufacturers; 24 others compensate retail pharmacies for supplying medications to patients and then apply for rebates from the manufacturers (Kates et al., 2006). ADAP programs in most states currently face a number of significant challenges. Beginning in 2001, the
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