Governments which opt for prescription drug bulk purchasing agreements can save taxpayers money but at the risk of reducing patient health by limiting access to optimal medicines, according to new research.

In virtually all cases, bulk purchase agreements provide savings to drug plan sponsors, but choice and flexibility are often sacrificed, warns report author Dr Kristina Lybecker, a senior fellow at Canadian free-market public policy think tank the Fraser Institute, which has published the report.

"These savings come with the potential for negative consequences including risks to patient health and wellbeing, and reductions in pharmaceutical innovation," Dr Lybecker adds.

Bulk purchasing agreements seek to reduce per-unit costs of prescription drugs by increasing the volume of product purchased. In pharmaceutical markets, this is done by combining multiple purchasing entities such as provinces, municipalities or employers to secure lower prices for their medicines, usually directly from the manufacturer, the study notes. 

Earlier this year, Canadian provinces and territories agreed on the bulk purchase of six widely-prescribed generic drugs, for expected savings of C$100 million.

"Pharmaceutical costs, along with health care costs generally, are escalating at a rate that outpaces general inflation several times over, leaving government providers with the difficult task of balancing consumer needs against budgetary realities," says Dr Lybecker, whose report examines bulk pharmaceutical purchase agreements in New Zealand, the US and Europe. She specifically considers how such deals are used in each jurisdiction, quantifying the savings and identifying related consequences.

The anecdotal evidence which the study has gathered establishes that bulk purchasing agreements consistently generate cost savings, ranging from "modest" to "quite impressive," and that they are attributable to:
- provider pharmacies accepting lower reimbursement and dispensing fees in exchange for a larger volume of prescriptions; 
- reduced administrative expenses when spread over a larger number of units, essentially lowering the per-unit cost through economies of scale; and

- enhanced opportunities to influence market share from increased volumes and concentrations in a given area, which results in better rebates negotiated with pharmaceutical companies.

However, the report also warns that bulk purchasing of drugs may be detrimental to patients' health.

"These agreements can restrict access to medicines, forcing patients to pay out-of-pocket for the medicines they need as well as delay introduction of new innovative medicines," Dr Lybecker cautions.

"This has the potential to harm patients and create additional expenditures on non-pharmaceutical forms of care. Indeed, the New Zealand experience clearly demonstrates poorer health outcomes, reduced innovation and a possible lack of savings overall as costs are shifted to other areas of care," she adds.

Her report concludes that while there is no question that bulk purchasing plans for prescription drugs can save money, governments must be cautious that potential savings are not offset by higher non-pharmaceutical health costs and poorer patient outcomes.