Medicaid Overpays for Prescription Drugs, GAO Report Finds
CMS does not enforce a 1990 law that requires pharmaceutical companies to provide Medicaid with the "best price" for brand-name prescription drugs, according to a Government Accountability Office report released on Monday, the New York Times reports. Under the law, Medicaid only pays for prescription drugs when pharmaceutical companies agree to provide certain discounts through rebates to states. According to the report, pharmaceutical companies in some cases conceal the best prices from Medicaid to reduce the amount of the rebates, and CMS in many cases does not "ensure the accuracy of reported prices."
In addition, CMS officials do not require pharmaceutical companies to make corrections when the agency finds errors or problems with reported prices, the report found (Pear, New York Times, 3/8). The report also found "considerable variation" in how pharmaceutical companies determine the best prices and that CMS does not provide guidelines for how companies should consider prices negotiated by pharmacy benefit managers on behalf of private health plans and insurers (CQ HealthBeat, 3/7).
According to the report, CMS in most cases allows pharmaceutical companies to use "reasonable assumptions" to determine the best prices. GAO officials said that they could not determine the total amount of federal Medicaid overpayments for prescription drugs. Prescription drug expenditures currently account for about 10% of total Medicaid spending, or about $37 billion of $300 billion this year, the Times reports.
Sen. Chuck Grassley (R-Iowa), who requested the report with Rep. Henry Waxman (D-Calif.), said that CMS "has been negligent," adding, "For 15 years, drug companies have been profiting from a system that costs taxpayers untold hundreds of millions, if not billions, of dollars annually" (New York Times, 3/8). Grassley added that the GAO report was "a damning report on Medicaid drug spending" (CQ HealthBeat, 3/7).
In a written response to the report, CMS officials said that they should provide "clear guidance" on how pharmaceutical companies should determine the best prices. However, the Bush administration denied that CMS provides "inadequate oversight" over Medicaid and indicated that the federal government lacked the resources to ensure the accuracy of reported prices (New York Times, 3/8). The report is available online.