HHS Finds Drug Firms Violated Best-Price Rules
A "handful" of pharmaceutical companies "skirted" Medicaid drug pricing rules by selling brand-name drugs to HMOs "without reporting the lower prices as required under federal law," according to a new report from the HHS Office of Inspector General. The Wall Street Journal reports that the study concluded that this practice cost Medicaid $108 million in fiscal years 1998 and 1999. Reported drug prices are used to calculate how much drug companies must rebate to Medicaid under a law that requires firms to give the government the "best price" for a drug. However, "repackagers," who "buy drugs for resale in different quantities or under their own brand names," are exempt from the best-price law, although HMOs that act as repackagers are not. According to the OIG report, seven of 53 drug companies (all unidentified) sold pharmaceuticals at a cost below the best reported price to eight repackagers, three of which were HMOs, thereby violating Medicaid rules. HCFA said that it "plans to collect money owed by" companies that sold drugs to HMOs below the best price, and it is reviewing the policy granting non-HMO repackagers an exemption from the best-pricing requirement. The new report comes a year after an OIG study found that "two popular drugs were sold to HMOs classified as repackagers for 34.3% less than the reported best price" (Lueck, Wall Street Journal, 4/6). And last month, Schering-Plough Inc. revealed that federal and state investigators, as part of a larger criminal inquiry into the industry, are examining whether the company violated best-pricing laws in its sales to HMOs (California Healthline, 3/14). To read the full HHS report, go to http://www.hhs.gov/progorg/oas/reports/region6/60000056.pdf Note: You will need Abode Acrobat Reader to view the report.