HHS Investigation Will Study Medicare Drug Costs
HHS' Office of Inspector General plans to conduct a "major investigation" to determine whether Medicare pays "too much" for prescription drugs used for chemotherapy, kidney dialysis, organ transplants and vaccines, HHS officials said yesterday. Congress has considered plans to add a comprehensive prescription drug benefit to Medicare, and HHS officials and lawmakers "are eager to find out whether the current pricing system is fair," the Los Angeles Times reports. Under the current system, Medicare pays doctors and clinics 95% of a drug's average wholesale price -- based on reports to the government by pharmaceutical companies -- regardless of the price that physicians or clinics have paid. Ben St. John, a spokesperson for the HHS inspector general, said that the average wholesale price reported by drug companies may represent "a greatly inflated number," as providers often purchase the drugs for less. In the OIG investigation, officials will compare Medicare spending with prices that doctors and hospitals pay and the practices that Medicare and other government agencies use to pay for drugs. In 1998, an HHS inspector general report found that Medicare paid between 15% and 1,600% more for 34 drugs than the Department of Veterans Affairs which uses different pricing mechanisms. The new investigation also will include separate inquiries into payments for Epogen, a drug used by dialysis patients, and inhalation drugs used by patients with respiratory problems.
A September hearing of two House Energy and Commerce subcommittees indicated that doctors and clinics often purchase drugs at prices "far below" the average wholesale price. In addition, the committee said that Medicare beneficiaries, who pay a 20% co-payment based on the average wholesale price, often pay more in co-payments than a drug's actual retail price. Ken Johnson, spokesperson for the House Energy and Commerce Committee, called the average wholesale price a "joke," adding, "We're talking about billions of wasted dollars." He said, "We're determined to bring an end to this. The system isn't working. As more and more people realize they are getting fleeced, the anger is going to grow." The committee plans to introduce a Medicare reform bill this year (Rosenblatt, Los Angeles Times, 10/2).