Montana Viewpoint


April 26, 2004

Last legislative session I teamed up with Rep. Don Roberts, R-Billings, and the AARP to pass a bill that provided a drug discount to seniors and disabled folks. It was modeled on the Healthy Maine drug discount program, but it was unique in that a couple of guys who work on Medicaid for the Montana Department of Health and Human Services figured out a way to make it pay for itself by using rebate money from the drug companies. I won’t go into how it was done, it takes a lengthy explanation, but it was a really nifty trick. We called the program “Healthy Montana.”

We had contacted the U.S. Department of Health to make sure we were following the rules and had all our ducks in a row. Governor Martz was very supportive, and volunteered to talk to the Secretary of Health to get things on the fast track. It was a very positive experience for almost everyone, with the apparent exception of the drug companies, which later events brought to light.

Medicaid is the state-run medical and prescription drug program funded about 80% by the federal government, 20% by the states, and subject to federal guidelines. The states get reduced rates from pharmaceutical companies when they purchase prescription drugs to be used in their Medicaid programs. This is a cost containment mechanism. Medicare, the federal program for seniors and disabled folks, does not have this cost containment factor in its limited drug program, and won’t have it in the expanded program, either.

Healthy Montana was an expansion of Medicaid, and would have use this same discount tool in buying drugs. It was expected to cost the state a whopping $35,000 in one time start-up money; but it’s now been rendered irrelevant by the new Medicare drug legislation.

We applied for what’s called a waiver so we could begin the process, only to be told that there was now a new stipulation that the state would have to pony up 35% of the cost of the program. Say what! Where was this rule when we were getting advice from the feds?

Well, it wasn’t anywhere, it just sort of showed up along about a month after the Legislature adjourned. Montana wasn’t alone in being surprised. Over 25 states had or were initiating drug discount programs when they found out about the 35% clause. Curiously, at the same time, the Medicare Drug legislation was just beginning to be written by Congress.

Since all the affected state programs had methods to get drugs at a discounted price, and the federal program doesn’t; the speculation arose that the drug companies, seeing the writing on the wall, decided to get their own drug benefit bill going that didn’t make them lower their prices significantly. The 35% rule was just a way to buy time.

The mystery is; why did the feds cut the drug companies a fat hog? I mean, if you’re offering drug companies a market of 41 million Medicare consumers, you’d think you’d be in a pretty good position to dictate terms. The drug program for federal employees—including members of Congress—mandates cost controls, and the Veterans Administration drug program is second to none in getting our Vets cheap prescription drugs. For a drug that an uninsured person would pay $100 for, the Feds pay $54 and the VA pays $46. In some cases Medicare is paying 10 times more than the VA for the same drug.

It’s not that Congress couldn’t write a drug bill that provided savings for the American taxpayers, who will be paying for the program, it wouldn’t. It’s a shame to put the interests of the world’s second most profitable industry (after oil companies) ahead of the American public, but that’s what happened.

Well, at any rate, it’s good to know who runs the country.


Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620