Federal Officials Call For Rx Pricing Reforms

After years of investigations that show physicians can buy pharmaceuticals at a tenth of what the government pays, Congress is considering cutting reimbursement rates for some prescription drugs under Medicare and Medicaid.

Interest in reforming the payment system has accelerated following the recent release of two federal agency reports. Projections show that the federal government can save taxpayers at least $1 billion by changing the reimbursement structure, which has been in place for nearly 30 years.

The House Energy and Commerce Committee and its Oversight and Investigation Subcommittee late last month discussed the findings of a Sept. 21 General Accounting Office (GAO) report.

In addition to the GAO report, investigations have been conducted by the Justice Department, the National Association of Medicaid Fraud Control Units and the U.S. Dept. of Health and Human Services (HHS)

While most drug companies have played by the rules, there is “evidence some manufacturers have manipulated (prices),” Rep. James Greenwood (R-PA), subcommittee chairman, says. “It’s a win-win-win situation for manufacturers, while the losers are Medicare beneficiaries and American taxpayers, who foot the bill.”

States, too, are overpaying doctors for similar brand-name drug reimbursements by as much as $1.08 billion, an Aug. 2001 HHS report finds. (For more on state and federal drug pricing investigations, see Stateline.org’s April 2001 report.)

Louisiana’s Medicaid reimbursement rate for Leucovorin (a drug that is used to combat chemotherapy-related anemia) in 1997 was $50.34, while doctors could buy the drug for $2.39, health care businessman-turned-whistleblower Zachary Bentley said.

Energy and Commerce Committee Chairman Billy Tauzin (R-LA) was incensed over numbers like this. “Patients in America, upon learning they’re paying 500% more than the cost of the drug, are not going to let anybody put up with this system much longer,” he says.

Tauzin says Congress must take quick legislative action to correct what he calls an “intolerable” situation. “We’ll not only save state Medicaid programs their lives, but 50 percent of (the dollars) will go back to the feds,” he says. Medicaid is a state-federal program in which the federal government ‘matches’ a certain amount of state dollars.

Bentley has worked with the Justice Department on prescription price investigations. His firm, Ven-A-Care of the Florida Keys, Inc., is a co-plaintiff with the state of Texas in a lawsuit aimed at three pharmaceutical companies accused of committing Medicaid fraud totaling $79 million.

Bentley says there “has to be more truth and honesty with the drug manufacturers” who report prices to federal and state governments. “If you have manufacturers who are willing to provide false representations of (costs), any system is doomed,” he says.