California State Auditor Elaine M. Howle issued a June 2007 report to follow-up on her past recommendation to implement bulk procurement cost-savings in the state's contracts for pharmaceuticals. Since 70% of such drugs are purchased for adult and juvenile corrections use, Howle noted that if the federally-appointed receiver for correctional health care took over drug purchases for the prison system, it would leave the 30% of drugs procured for all other state departments at a bulk-pricing disadvantage.
Understandably the state wants the best value for its drug purchases, but how to accomplish that goal is an exercise in bureaucracy. For the period 2005-2007, the state negotiated two contracts that were estimated to save $7.8 million over prior contract provisions. One contract provides prescription medications to parolees, while the other deals with a vendor to centralize all state drug procurements.
An initial major task was to approve a state-wide drug formulary, which is a list of approved bulk-purchased pharmaceuticals and the standard uses for those drugs. The object of the formulary is to encourage competition among drug suppliers; approximately 780 drugs are now in California's formulary.
However, not everyone agrees with this plan. Specifically, the receiver over health care for the state's corrections department, Robert Sillen, has separately contracted with Maxor National Pharmacy Services Corp. to provide management consulting services for prison pharmaceuticals. It appears that Maxor, which is overseeing all prison drug purchases, will operate independently from other California formulary users and will seek the greatest discounts for the prison system's particular pharmacy needs.
Sillen has previously announced that his overhaul of pharmaceutical purchases for state prisons will save $85 million annually, far more than the amount estimated by the State Auditor. The difference may be linked to Sillen's independence from California's massively bureaucratic Department of General Services, which normally contracts for all such items. See: California State Auditor Letter Report, No. 2007-501, June 12, 2007. The audit is on PLN's website.
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