Answer: True the greater the volume the greater the negotiating power. Aside from the fact that your foresight is unlikely to happen there are other reasons why a state may not want to join such a venture. A state is responsible to its citizens and that means protecting its employment base. Goods manufactured within the state should receive greater negotiating points than those manufactured outside the state. But this doesn’t mean that states should not pool their purchases to obtain greater buying power.

Let us assume that a State with a large economy like California should decide that its Medicaid drug purchases should be made using a formula similar to that used by Canada. The Canadian government has enacted legislation governing drug Prices. Canadian law sets drug prices allowing drug manufacturers who market their drugs in Canada a reasonable profit above their manufacturing costs as determined by Canadian authorities. The State of California could do the same after all it has an economy (GDP) almost double that of Canada.

If you think this is not big bucks look at this example: A friend of mine has allergic rhinitis (hay fever) and purchases his nasal spray from a Canadian pharmacy. The retail price is about $134 for a one months supply when purchased in the USA, the price at Walmart is about $79 and the price in Canada is about $34. This amounts to a saving of about 394%. Think of the savings to the state’s budget. Now if all the states would form an alliance and pool their drug purchases they could demand that drug companies sell their drugs at the same price as they do in Canada thus simplifying the whole negotiating process. For some negotiations they may have to resort to a tactic used by the United Auto Workers, target one of the Big Three competitors and the others will fall into line. For drugs that have no competition you might try to shame them into selling at the Canadian price but most of these companies have no shame when it comes to ripping off Americans.