The quality of all VPP drugs will be monitored via testing and inspection activities conducted by the State. This quality control function will be of a continuous nature to assess, at all times, the availability of quality VPP prescription drugs to participating VPP pharmacies and, in turn, to the Medi-Cal consumers. GOVERNMENTAL INTERFERENCE INTO PRIVATE ENTERPRISE The plan does not interfere with free enterprise. To the contrary, competitive bidding encourages the operation of free market forces. Actually the VPP is not far afield, philosophically, from the cooperative buying plan which many pharmacies currently employ. The Department of Health simply wants to enjoy the same economies of scale and have the advantage of purchasing power that businesses endorse. The pilot is not designed to generate net savings, but to provide the Department of Health with the necessary instrument to test the hypothesis of the VPP concept. The hypothesis was generated by knowledgeable health care professionals who have concluded that the State of California can save taxpayer dollars via the VPP. The pilot is so designed to enable the Department to evaluate whether: (1) tax dollars can be saved; and, (2) high quality pharmaceuticals can be provided to Medi-Cal consumers through the VPP. By means of the pilot, sufficient data will be collected to enable management to make a confident decision concerning the viability of the hypothesis on a statewide basis. If the VPP pilot indicates that a tax savings can be realized by instituting a statewide program, then programatic experience is gained for the polity. The Department can apply the same methodology to other programs (e.g., in purchase of eyeglasses, dentures, etc.) currently being administered by Medi-Cal, to retard substantial price increases. If the pilot indicates that a program savings cannot be realized via the VPP, a statewide approach will be scrapped. Thus, the hypothesis can be tested without burdening Medi-Cal with a permanent program that may be a liability. 2. Why is the drug area focused upon? Aren't there other areas of rising cost that should be contained? 3. 4. All areas of Medi-Cal are being reviewed for potential cost controls. Extensive attention, for example, is being directed toward containment of escalating inpatient hopitalization costs. Inpatient hospital services, optometric services, and others are in the process of undergoing further controls right now. Pharmaceutical services and precribed drugs is but one of a number of services in which cost savings can be realized. Additional efforts are being expended to reduce waste, fraud and abuse as well as to eliminate costly administrative practices. The Department, however, cannot limit its efforts to any single area. The potential benefits that may be achieved by the VPP are too great to be ignored. What about the Medi-Cal MAIC and Federal MAC programs... does VPP replace them? The Maximum Allowable Ingredient Cost program will continue to be implemented and will be augmented by the newly mandated federal Maximum Allowable Cost program. These programs compliment VPP rather than substitute for it, or it for them. Cannot the Medi-Cal Drug Formulary be a source of program savings? With a Formulary, why do you need VPP? The Medi-Cal Drug Formulary itself is a source of savings. The deletion of marginally effective, duplicative and/or abuse potential drugs can have a significant budget impact. Additions to the Formulary of (low cost) generic drugs which categorically compete with sole source, frequently high cost medications will have beneficial results over a long-term provided the Department encourages cost accountability. Again, these programs compliment VPP. 5. With the stability of drug prices generally, can VPP really save money? The pharmaceutical industry has made extensive claims about the stability of drug prices. While it is true that the output of the pharmaceutical industry has been less inflationary than consumer products generally, it is also true that the consumer price index for wholesale prescription drug prices has climbed from 100 index units in 1967 to 128 index units in 1976. Almost all of the increase has come in the past two years. The foregoing suggests that a VPP could be effective in containing such escalation since the bid process is competitive and the resulting award would guarantee prices for specific periods. In any case, reduced expenditures brought about by lower, competitively bid prices, are desireable so long as other conditions remain equal. |